Assignment 2: Financial Statement Analysis 10% of total grade
Ace Hardware is a leading family business that specialises in the manufacturing and wholesale distribution of floor tile products. Over the past two years Ace Hardware has experienced difficult operating conditions. John, the company accountant, has prepared the income statement and balance sheet for the prior two years for a management meeting. The owners of Ace Hardward have asked John to evaluate the financial statements and prepare an evaluation of operating capability to present to senior management. 60 percent of sales are made on credit.
Profit and Loss
Total Income
Less Cost of Sales 73.9% 77.1%
Gross Profit (Loss) 3,791,024 26.1% 3,014,553 22.9%
Total Other Income 86,363 0.6% 3.3%
Less Expenses
Administrative Staff Costs 2,385,760 16.40% 1,719,171 14.35%
Advertising and Marketing Support 140,470 0.97% 75,500 0.63%
Bad Debts 68,534 0.47% 63,057 0.53%
Administrative Overhead 280,600 1.93% 290,238 2.42%
Freight and Cartage 10,210 0.07% 21,681 0.18%
Hire of Plant and Equipment 103,828 0.71% 118,016 0.98%
Bank Charges 25 ,573 0.18% 20,749 0.17%
Light and Power 49,176 0.34% 42,017 0.35%
Lease of MV 28,160 0.19% 2,201 0.02%
MV Running Costs 332,103 2.28% 249,192 2.08%
Rent 328,307 2.26% 321,177 2.68%
Repairs and Maint 35,367 0.24% 18,875 0.16%
Telephone 67,899 0.47% 63,170 0.53%
Travel 21,398 0.15% 8,516 0.07%
Total Operating Expenses26.7% 25.2%
Net Operating Profit (Loss)
201X 201Y
Balance Sheets
Current Assets
Cash at Bank - -
Trade Debtors 1,116,467 875,607
Stock on Hand 1,697,220 1,231,111
2,813,687 2,106,718
Total Current Assets
Fixed Asets
Furniture & Fitting - At Cost 43,511 43,511
Less Accum Depn Frn & Fitting (36,606) (37,543)
Plant & Equip - At Cost 1,329,334 1,329,334
Less Accum Depn - Plant & Equip (1,045,363) (1,096,991)
Motor Vehicle - At Cost 863,042 840,728
Less Accum Depn - Motor Vehicle (707,518) (720,326)
Office Equipment - At Cost 368,650 368,650
Less Accum Depn - Office Equip (302,075) (319,537)
512,975 407,826
Total Fixed Assets
Investments
Shares in Listed Company 96,788 96,788
Loans & Deposits 153,782 153,782
250,570 250,570
Total Investments
Intangible Assets
Trademarks & Patents 867 27,958
Goodwill - At Cost 5,430 5,430
Formation Expense - At Cost 1,000 1,000
7,297 34,388
Total Investments
Total Non Current Assets 770,842 692,784
Total Assets
Current Liabilities 3,584,529 2,799,502
Bank Overdraft 98,917 116,643
Trade Creditors 1,394,198 1,181,797
Loan At Call - To Directors 149,354 137,586
1,642,469 1,436,026
Total Current Liabilities

Deferred Liabilities
1,819,577 1,326,934
1,819,577 1,326,934

3,462,046 2,762,960
Loan - Unsecured - business Partner
Total Deferred Liabilities
Total Liabilities
Equity Net Assets 122,483 36,542
Profit B/F 1 993
Settled Capital 50 50
Accumulated Trust Funds 31,027 31,027
Retained Profits 91,405 4,472

122,483 36,542
Total Equity
Questions:
1. Calculate the following ratio's for the two financial years:
a. Current
b. Quick
c. Debt
d. Inventory Turnover for year Y only
e. Accounts Receivable Turnover for year Y only
f. Gross Profit Percentage
g. Profit Margin
h. Return on Total Assets for year Y only
i. Return on Owner's Equity for year Y only
2. Write a short report that compares the business' performance in 201X with that in
20XY regarding its liquidity, financial flexibility, operating capability and profitability.
The report must be presented in essay format with an introduction, body and conclusion and all external references must be referenced using APA 6th edition referencing style. Word count should not exceed 1,000 words.