Swansong plc specialises in technological products deployed by companies in the automotive and electronics sectors around the world. The board of directors has convened a meeting to discuss the draft accounts for the year ended 31 March 2021, a period which has seen the company continue to invest in its infrastructure and operations. Chris, one of the directors has sent you, the Financial Accountant, the following note: “I’ve had a quick look at these accounts. Whilst it’s good to see attributable profit up, it could have been twice the size if operating costs hadn’t got out of hand. On top of that, current assets have slumped and long-term borrowings are up by over £15m”. You are required to: analyse the company’s profitability, liquidity, working capital management and gearing as portrayed in the company’s draft accounts reproduced below. Your evaluation should be supported by appropriate calculations (rounded to one decimal place) and should include a response to the concerns raised by Chris. Swansong plc Statement of Profit or Loss 2021 2020 £’000s £’000s Revenue 616,040 465,412 Cost of sales 363,464 269,938 Gross profit 252,576 195,474 Operating costs 181,324 145,060 Operating profit 71,252 50,414 Net finance costs 39,583 29,688 Profit before taxation 31,669 20,726 Taxation 6,334 4,144 Attributable profit for the year 25,335 16,582 Statement of Financial Position 2021 2020 £’000s £’000s Assets Non-current assets 217,225 162,257 Current assets Inventories 138,474 119,662 Trade receivables 114,348 89,450 Cash 51,475 136,689 304,297 345,801 Total assets 521,522 508,058 Liabilities Current liabilities Trade payables 86,334 111,414 Tax and other payables 15,628 17,807 101,962 129,221 Non-current liabilities Borrowings 108,155 92,767 Total liabilities 210,117 221,988 Net assets 311,405 286,070 Total equity 311,405 286,070
Swansong plc specialises in technological products deployed by companies in the automotive and electronics sectors around the world. The board of directors has convened a meeting to discuss the draft accounts for the year ended 31 March 2021, a period which has seen the company continue to invest in its infrastructure and operations.
Chris, one of the directors has sent you, the Financial Accountant, the following note:
“I’ve had a quick look at these accounts. Whilst it’s good to see attributable profit up, it could have been twice the size if operating costs hadn’t got out of hand. On top of that, current assets have slumped and long-term borrowings are up by over £15m”.
You are required to:
analyse the company’s profitability, liquidity, working capital management and gearing as portrayed in the company’s draft accounts reproduced below. Your evaluation should be supported by appropriate calculations (rounded to one decimal place) and should include a response to the concerns raised by Chris.
Swansong plc
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Statement of Profit or Loss |
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2021 |
2020 |
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£’000s |
£’000s |
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Revenue |
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616,040 |
465,412 |
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Cost of sales |
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363,464 |
269,938 |
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Gross profit |
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252,576 |
195,474 |
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Operating costs |
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181,324 |
145,060 |
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Operating profit |
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71,252 |
50,414 |
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Net finance costs |
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39,583 |
29,688 |
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Profit before |
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31,669 |
20,726 |
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Taxation |
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6,334 |
4,144 |
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Attributable profit for the year |
25,335 |
16,582 |
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2021 |
2020 |
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£’000s |
£’000s |
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Assets |
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Non-current assets |
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217,225 |
162,257 |
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Current assets |
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Inventories |
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138,474 |
119,662 |
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Trade receivables |
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114,348 |
89,450 |
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Cash |
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51,475 |
136,689 |
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304,297 |
345,801 |
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Total assets |
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521,522 |
508,058 |
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Liabilities |
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Current liabilities |
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Trade payables |
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86,334 |
111,414 |
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Tax and other payables |
15,628 |
17,807 |
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101,962 |
129,221 |
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Non-current liabilities |
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Borrowings |
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108,155 |
92,767 |
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Total liabilities |
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210,117 |
221,988 |
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Net assets |
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311,405 |
286,070 |
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Total equity |
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311,405 |
286,070 |
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