Sheen Holdings Plc wants to diversify its portfolio of investments in subsidiary companies. It already owns a retail company with stocks of groceries and a much smaller range of non-food goods than Extra hypermarkets. They have identified 2 possible acquisition targets and want you to complete the ratio analysis, evaluate the findings, and advise them on which one they should acquire and why.
They have identified 2 young companies that are both 2 years old and growing rapidly. They are very different in what they do: ALD Ltd is based in 2 retail stores, ALD Ltd are looking into the possibility of converting their failing retail store into a provider of hotel and ALD is looking for another property; ZEE Ltd has a large fresh baked item store, with the potential for more space as it is based new build building which still has empty space. ZEE is looking for a contract with a well-known brand in the retail industry so that they stabilise their income and growth.
Both target companies are 2 years old and here are extracts from their financial statements:
Evaluate the financial statements and make a convincing argument for investment in one of the two target companies.
Transcribed Image Text:Statements of Profit or Loss (SOPL)
ALD Ltd
Turnover
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
2,244,560 100%
Profit for the year
vertical analysis
(1,127,592) 50.24%
1,116,968 49.76%
(635,096) 28.29%
22,030 0.98%
Other interest receivable and similar income5,500
Interest payable and similar
charges
503,902
0
Profit on ordinary activities before 509,402
taxation
Tax on profit on ordinary activities
(56,810)
452,592
22.45%
0.25%
0.00%
22.69%
2.53%
20.16%
ZEE Ltd
vertical analysis
£
2,772,375 100%
(751,704) 27.11%
2,020,671
(1,224,413) 44.16%
0
0.00%
796,259
2,262
0.08%
(96,263) 3.47%
702,258 25.33%
(208,056) 7.50%
494,202 17.83%
Transcribed Image Text:Statements of Financial Position (SOFP)
ALD Ltd
Fixed assets
Tangible assets
Total Non Current Assets
Current ass ets
Trade receivables
Cash at bank and in hand
Total Current Assets
Total Assets
Liabilities
Current liability: Trade payables
Non current liability: Bank borrowing
Total Liabilities
Equity and reserves
Called up share capital
Profit and loss account
Total Equity
Total Equity and Liabilities
£
97,600
10.5%
97,600 10.5%
234,080 25.2%
598,815 64.4%
832,895 89.5%
930,495 100.0%
vertical analysis
477,900 51.4%
0
477,900
3
452,592
452,595
930,495
0.0%
51.4%
0.0%
48.6%
48.6%
100.0%
4
ZEE Ltd
75,000
75,000
1,174,837
440,119
37.5%
659,718 56.2%
1,099,837
93.6%
vertical analysis
680,632
6.4%
6.4%
300,763 25.6%
3
494,202
494,205
379,869 32.3%
1,174,837
100.0%
57.9%
0.0%
42.1%
42.1%
100.0%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
