Description: Your answers to the assignment’s requirements will form the basis of this individual assessment task. The purpose for this assessment is to assist students in early assessment of understanding the course content. The case study answers will relate to material cover for weeks 1 to 5 and will assess learning outcomes 1, 2, 5, and 7 listed in the Rubric Assessment criteria at the end of this document
What is expected from you?:
Your calculation answers to the requirements for this case study should be calculated using excel Spreadsheets, which is an expected electronic tool used in commercial and professional employment positions. Financial ratio formulae are provided at the bottom of this page for you to use for the ratio calculations for requirement 2 (see page 3).
Your calculations submitted as a separate Excel file with your total submission. That is, you may wish to use either a Word document for your analysis and use an Excel file for your calculations (submitting two separate files) or you may wish to include your analysis into your Excel file and submit one file. Your analysis should require a maximum of 600 words.
Submission Details:
? Electronic submission via link (button) provided on the study desk.
? Up to 5 separate files can be submitted through the electronic submission ‘button’
? To receive marks for this assignment YOU MUST include your name and student number in your assignment file in the header of each submitted document.
? Turnitin will not be used for this assignment because of the level of similarities expected with the submitted files. However, students must not collude with other students or commit plagiarism to complete their assignment calculations or analyses.
Financial Ratio Formulae:
Net profit + Interest expense after tax
Average total assets
Net profit
Sales
Net profit after tax — preference dividends
Average shareholders’ equity
Current assets
Current liabilities
Cash, marketable securities, accounts receivable
Current liabilities
Total liabilities
Total equity
Table 1
VISCOUNT LTD
Balance sheets at 30 June
2014 2015 2016
$ $ $
Assets
Current assets
Cash 364,700 292,720 123,790
Inventories
Finished products 600,000 700,000 800,000
Work in progress 245,500 258,000 342,000
Raw materials and supplies 483,050 450,000 550,000
Accounts receivable 521,000 669,280 1,184,210
Total current assets 2,214,250 2,370,000 3,000,000
Non-current assets (net of accumulated depreciation)
Land (at cost) 600,000 816,300, 1,334,104
Buildings (at cost) 2,215,500 2,323,000 3,400,000
Machinery (at cost) 2,538,980 2,500,370 4,505,640
Total non-current assets 5,354,480 5,639,670, 9,239,744
Total assets 7,568,730 8,009,670 12,239,744
Liabilities
Current liabilities
Accounts payable 355,700 360,000 544,620
Provision for tax 500,000 500,000 800,000
Provision for dividend 130,000 430,000 672,000
Total current liabilities 985,700 1,290,000 2,016,620
Non-current liabilities
Debentures 683,030 903,370 2,999,020
Mortgages 500,000 400,000 1,000,000
Total non-current liabilities 1,183,030 1,303,370 3,999,020
Total liabilities 2,168,730 2,593,370 6,015,640
Net assets 5,400,000 5,416,300 6,224,104
Owners’ equity
8% preference shares 500,000 500,000 1,200,000
Ordinary shares ($1) 4,000,000 4,000,000 4,000,000
Retained profits 900,000 916,300 1,024,104
Total owners’ equity 5,400,000 5,416,300 6,224,104
Table 2 Additional information from VISCOUNT Ltd’s financial statements
2014 2015 2016
$ $ $
From Income Statement
i Annual sales
Credit 2,605,000 3,011,760 4,500,000
Cash 120,000 142,600 1,500,000
Total annual sales 2,725,000 3,154,360 6,000,000
ii Cost of goods sold 1,662,250 1,861,070 3,720,000
iii Net profit before tax 926,500 946,300 1,579,804
Net profit after tax 463,250 473,150 789,902
iv Interest expense before tax 94,642 104,269 399,902
Interest expense after tax 47,321 52,135 199,951
Table 3
From Balance Sheet
v Balances as at 30 June 2013 30 June 2013
Accounts receivable 450,000
Total assets 7,000,000
Inventory 1,441,870
Table 4
vii Selected financial ratios 2014 2015 2016 Industry average 2016
Ratio
1 Current Ratio 2.25 2.25
2 Quick Ratio 0.9 1.10
3 Debt to equity ratio 0.40 0.48 0.6
4 Rate of return on shareholders’ equity 8.6% 8.8% 16%
5 Gross margin ratio 39% 41% 38% 40%
6 Net margin ratio 17.00% 15.00% 16%
7 Rate of return on assets 6.75% 6.56% 14%
8 Interest expense as a percentage of sales 3.47% 3.31% 6.67% Not Available
Requirements:
1. Prepare a common size Balance Sheet and Income Statement Extract from the data in Tables 1
and 2 using the 2014 year as the base-year (30 marks)
2. Calculate the eight (8) missing ratios from Table 4 above using formulae provided on page 1.
(30marks)
3. Evaluate and provide your conclusions about the financial position of Viscount Ltd; using either Common Size Statements information or these eight (8) ratios in trend and comparative analyses: a. a three-year 2014, 2015, and 2016 longitudinal trend analysis for the company (16marks)
b. a 2016 cross-sectional analysis for company and the industry average. ( 8marks)
4. Identify the means by which Viscount Ltd has funded the increase in its non-current assets and comment on how and why this means of purchasing non-current assets may affect the level of business risk of of the company. (Please note it is not intended to calculate the actual effect on
the level of business risk between the year 2015 and 2016. You only need to identify how and
discuss why this level of business risk effect occurs). ( 9 marks)
5. The company has increased its annual sales significantly in 2016 compared to 2015 and 2014.
Identify
a. How has the company increased its production capacity to achieve its sales expansion
strategy in 2016? and ( 4 marks)
b. What is the impact of its increased production capacity on the solvency position of Viscount
Ltd? ( 3 marks)
ACC8105 – Financial Statement Analysis – Assignment 1 Due: 6 pm 5th April 2017 – Marked out of 100 – weighting 10 marks of course
Rubric - Assessment Criteria:
Learning Outcome Criteria Excellent (85=100%) Very Good (75-84%) Good (74-65%) Satisfactory (64-50%) Unsatisfactory ( 50%)
integrate theoretical and technical accounting knowledge particularly in the area of financial accounting information at a professional level by developing understanding the purposes of accounting information analysis and the application of the knowledge to decision making Calculation of common size statement 30 marks Complete all calculations without errors.
Compliance with all aspects of required presentation at a very experienced management level. A high standard of calculations with some errors. Non- compliance with all aspects of required presentation but at a very experienced management level. Some errors of calculations. Noncompliance with all aspects of required presentation but not at a very experienced management level A small number of errors of calculations. Non-compliance with many aspects of required presentation but not at an experienced management level Major errors of errors of calculations. Noncompliance with most aspects of required presentation but not at an experienced management level
demonstrate an understanding of the range of techniques employed in financial statement analysis and the role of both financial and nonfinancial data
Calculation of financial ratios
30 marks All Ratios are correct. Shows insights beyond ordinary in analysis and interpretations. Shows quality in the development of a credible argument. Almost all Ratios are correct. Shows some insights in analysis and interpretations. Shows development of a credible argument. Most Ratios are generally correct. Several minor problems with analysis and interpretations. Some Ratios are correct. Some problems with analysis and interpretations. Satisfactory level for an early career executive. Ratios are generally not correct. Serious
major problems with
little or no analysis or interpretations.
describe, explain, interpret and
analyse financial statements
Use of Common
Size and Ratio Analysis to identify, evaluate, interpret, and discuss 21 marks Purpose is very clear. Scope is very clear. Very easy to follow the relevant links to Common Size and Ratio Analysis. Purpose is clear.
Scope is clear.
Limitations are clear. Only some minor problems with the relevant links. Purpose and Scope are generally clear. Limitations are generally good. Minor problems with the relevant links. Purpose is generally consistent though link is not altogether clear. Scope/Limitations are not completely relevant. Some problems with the relevant links. Purpose and Scope are not clear. Limitations are not complete and links are not relevant. Serious major problems with the relevant links
demonstrate an ability to solve problems through the analysis of financial and nonfinancial data
Conclusion to solve problems Identified, evaluated, interpreted, and discussed 19 marks Conclusion is based on all key issues and made very clear. Assumptions and Explanations are correct. Easy to follow interpretations. Conclusion is based on almost all of the key issues.
Assumptions and Explanations are clear with some minor problems with interpretations. Conclusion is based on most of the key issues. Assumptions and Explanations are generally correct. Several minor problems with interpretations. Not a strong
Conclusion. Some key issues missing. Weak argument. Some problems with interpretations. Very poor Conclusion and Evaluations. Lacks explanation or
justification. Serious major problems with interpretations.
Total Possible marks 100 marks
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