Timber City Plc. has been trading in merchandise for several years in Manchester. The information below relates to the extracts from the financial statements for the past two years. Statement of Profit or loss and other Comprehensive Income For the year ended 30 September. 2022 2021 £ £ Revenue 100,000 160,000 Gross Profit 45,000 70,000 Administrative expenses 22,500 27,500 Finance cost:10% loan note interest 1250 1250 operating profit before tax 21,250 41,250 less: tax for the year 8,000 16,000 Profit for the year 13,250 25,250 Dividends paid to equity holders 6050 8550 Extract of Statement of Financial Position as at September 30 2022 2021 Assets Non Current Assets 50,000 70,000 LESS: accumulated depreciation 10,000 12,500 Carrying amount 40,000 57,500 Current Assets Inventory 32,500 7,500 Trade Receivables 20,000 5,000 Bank Balance 4,000 37,500 56,500 50,000 Total Assets 96,500 107,500 Equity And Liability Ordinary share capital @50p each 23,000 23,000 Retained Earnings 17,200 10,000 10% Loan Notes 12,500 12,500 10% redeemable preference shares 0 2,000 52,700 47,500 CURRENT LIABILITIES Trade Payables 7,500 10,750 Taxation 24,000 16,000 Bank Overdraft 12,300 33,250 43,800 60,000 Tot. equity & liabiltiy 96,500 107,500 The Board of Directors were worried over the dwindling financial performance and precarious financial position of the Company. The company products were ageing; the economic depression biting harder as a result of the fluctuating exchange rate due to Brexit. The Company imports 60% of the goods sold in Garden City. The fluctuating exchange rate had affected the company’s importation. Consequently, the revenue of the Company dropped significantly. Write a brief and formal technical report to the Board of Directors to assess the performance, liquidity and stability of company using only: i. Return on Capital Employed ii. Total Assets Turnover iii. Quick Ratio iv. Fixed Interest Cover v. Debt Equity Ratio

Timber City Plc. has been trading in merchandise for several years in Manchester. The information below relates to the extracts from the financial statements for the past two years. Statement of Profit or loss and other Comprehensive Income For the year ended 30 September. 2022 2021 £ £ Revenue 100,000 160,000 Gross Profit 45,000 70,000 Administrative expenses 22,500 27,500 Finance cost:10% loan note interest 1250 1250 operating profit before tax 21,250 41,250 less: tax for the year 8,000 16,000 Profit for the year 13,250 25,250 Dividends paid to equity holders 6050 8550 Extract of Statement of Financial Position as at September 30 2022 2021 Assets Non Current Assets 50,000 70,000 LESS: accumulated depreciation 10,000 12,500 Carrying amount 40,000 57,500 Current Assets Inventory 32,500 7,500 Trade Receivables 20,000 5,000 Bank Balance 4,000 37,500 56,500 50,000 Total Assets 96,500 107,500 Equity And Liability Ordinary share capital @50p each 23,000 23,000 Retained Earnings 17,200 10,000 10% Loan Notes 12,500 12,500 10% redeemable preference shares 0 2,000 52,700 47,500 CURRENT LIABILITIES Trade Payables 7,500 10,750 Taxation 24,000 16,000 Bank Overdraft 12,300 33,250 43,800 60,000 Tot. equity & liabiltiy 96,500 107,500 The Board of Directors were worried over the dwindling financial performance and precarious financial position of the Company. The company products were ageing; the economic depression biting harder as a result of the fluctuating exchange rate due to Brexit. The Company imports 60% of the goods sold in Garden City. The fluctuating exchange rate had affected the company’s importation. Consequently, the revenue of the Company dropped significantly. Write a brief and formal technical report to the Board of Directors to assess the performance, liquidity and stability of company using only: i. Return on Capital Employed ii. Total Assets Turnover iii. Quick Ratio iv. Fixed Interest Cover v. Debt Equity Ratio

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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Timber City Plc. has been trading in merchandise for several years in Manchester. The information below relates to the extracts from the financial statements for the past two years.

Statement of Profit or loss and other Comprehensive Income For the year ended 30 September.

	2022	2021
	£	£
Revenue	100,000	160,000
Gross Profit	45,000	70,000
Administrative expenses	22,500	27,500
Finance cost:10% loan note interest	1250	1250
operating profit before tax	21,250	41,250
less: tax for the year	8,000	16,000
Profit for the year	13,250	25,250
Dividends paid to equity holders	6050	8550

Extract of Statement of Financial Position as at September 30

	2022	2021
Assets
Non Current Assets	50,000	70,000
LESS: accumulated depreciation	10,000	12,500
Carrying amount	40,000	57,500
Current Assets
Inventory	32,500	7,500
Trade Receivables	20,000	5,000
Bank Balance	4,000	37,500
	56,500	50,000
Total Assets	96,500	107,500

Equity And Liability
Ordinary share capital @50p each	23,000	23,000
Retained Earnings	17,200	10,000
10% Loan Notes	12,500	12,500
10% redeemable preference shares	0	2,000
	52,700	47,500
CURRENT LIABILITIES
Trade Payables	7,500	10,750
Taxation	24,000	16,000
Bank Overdraft	12,300	33,250
	43,800	60,000
Tot. equity & liabiltiy	96,500	107,500

The Board of Directors were worried over the dwindling financial performance and precarious financial position of the Company. The company products were ageing; the economic depression biting harder as a result of the fluctuating exchange rate due to Brexit. The Company imports 60% of the goods sold in Garden City. The fluctuating exchange rate had affected the company’s importation. Consequently, the revenue of the Company dropped significantly.

Write a brief and formal technical report to the Board of Directors to assess the performance, liquidity and stability of company using only:

i. Return on Capital Employed
ii. Total Assets Turnover

iii. Quick Ratio
iv. Fixed Interest Cover

v. Debt Equity Ratio

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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