Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2014 and 2015 are as follows:Dividends were paid on ordinary shares of £70,000 and £72,000 in respect of 2014 and 2015 respectively.Please provide the answer for the 1st question onlyRequired:(1) Comment on the performance of Threads Limited from the viewpoint of a business considering supplying a substantial amount of goods to Threads Limited on usual trade credit terms.(2) Calculate the following financial ratios for both 2014 and 2015 (using year-end figures for statement of financial position items):1 return on capital employed2 operating profit margin3 gross profit margin4 current ratio5 acid test ratio6 settlement period for trade receivables7 settlement period for trade payables8 inventories turnover period. Income statements for the year ended 30 June20142015RevenueCost of sales£0001,180£0001,200750)(680)500Gross profitOperating expensesDepreciationOperating profit450(200)(208)(66)234(75)167InterestProfit before taxation234159(48)111TaxationProfit for the yearStatements of financial position as at 30 June2014L0002015£000ASSETSNon-current assetsProperty, plant and equipment702687Current assetsInventories148236Trade receivables102156Cash2539553961,083Total assetsEQUITY AND LIABILITIESEquityOrdinary share capital (e1 shares, fully paid)Retained earmings500256756500295795Non-current liabilitiesBorrowings - bank loanCurrent liabilitiesTrade payablesOther payables and accruals60187616Taxation408124Short-term borrowings (all bank overdraft)1221999552381,083Total equity and liabilities

Solution:- 1) Calculation of the return on capital employed for both 2014 and 2015 as follows:-…

Answered: Threads Limited manufactures nuts and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2014 and 2015 are as follows:

Dividends were paid on ordinary shares of £70,000 and £72,000 in respect of 2014 and 2015 respectively.

Please provide the answer for the 1st question only

Required:

(1) Comment on the performance of Threads Limited from the viewpoint of a business considering supplying a substantial amount of goods to Threads Limited on usual trade credit terms.

(2) Calculate the following financial ratios for both 2014 and 2015 (using year-end figures for statement of financial position items):

1 return on capital employed

2 operating profit margin

3 gross profit margin

4 current ratio

5 acid test ratio

6 settlement period for trade receivables

7 settlement period for trade payables

8 inventories turnover period.

Income statements for the year ended 30 June
2014
2015
Revenue
Cost of sales
£000
1,180
£000
1,200
750)
(680)
500
Gross profit
Operating expenses
Depreciation
Operating profit
450
(200)
(208)
(66)
234
(75)
167
Interest
Profit before taxation
234
159
(48)
111
Taxation
Profit for the year
Statements of financial position as at 30 June
2014
L000
2015
£000
ASSETS
Non-current assets
Property, plant and equipment
702
687
Current assets
Inventories
148
236
Trade receivables
102
156
Cash
253
955
396
1,083
Total assets
EQUITY AND LIABILITIES
Equity
Ordinary share capital (e1 shares, fully paid)
Retained earmings
500
256
756
500
295
795
Non-current liabilities
Borrowings - bank loan
Current liabilities
Trade payables
Other payables and accruals
60
18
76
16
Taxation
40
81
24
Short-term borrowings (all bank overdraft)
122
199
955
238
1,083
Total equity and liabilities

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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