I have attached the assignments
Financial Statement Analysis Required Part A Question 1 Identify and discuss the benefits and limitations of ratio analysis. Question 2 You have been provided with a summary of the Profit & Loss data and Balance Sheet data for the past three years for Cooks & Cleans Limited (CCL). CCL are a home handy service that are called into people’s homes to cook and clean for them. CCL uses their own ingredients and cleaning equipment which is managed under a Periodic Inventory System. In the past three years CCL have invested significant funds into marketing both in print and online to increase their customer base and therefore boost income. They are wanting to employ more staff to ensure they can meet the demand when the expected demand for their services increase. Cooks & Cleans Limited Profit and Loss Statement 20X7 20X6 20X5 Sales income Cooking & Cleaning Income 187,718 188,189 177,743 Total Income Less Cost of Goods Sold Opening Inventory 628 562 210 Purchases – Ingredients & Cleaning Supplies 10,895 20,365 15,585 Less Closing Inventory (345) (628) (562) Cost of Goods Sold 11,178 20,299 15,233 Gross profit 176,540 167,890 162,510 Other Income Interest income 472 588 510 Dividend income 6,900 4,890 5,970 Total Income 183,912 173,368 168,990 Expenses General administration expenses 2,036 1,850 1,069 Advertising 17,890 16,400 10,540 Wages 128,280 115,450 113,600 Printing, postage & stationery 263 204 198 Telephone 2,388 1,788 1,512 Rent 13,520 13,000 11,960 Vehicle expenses 4,978 3,669 3,458 Total Expenses 169,355 152,361 142,337 Net Profit Before Tax 14,557 21,007 26,653 Less Taxation Expense (28%) 4,076 5,882 7,463 Net Profit After Tax 10,481 15,125 19,190 Cooks & Cleans Limited Balance Sheet 20X7 20X6 20X5 Current Assets Cash 1,807 2,050 2,063 Accounts receivable 6,578 3,604 2,613 Inventory 345 628 562 Total Current Assets 8,730 6,282 5,238 Non-Current Assets Property, plant and equipment 12,917 13,460 12,790 Term Deposit 30,000 30,000 30,000 Total Non-Current Assets 42,917 43,460 42,790 TOTAL ASSETS 51,647 49,742 48,028 Current Liabilities Accounts payable 1,616 1318 1,142 Accrued expenses 380 314 298 Tax payable 4,076 5,882 7,463 Total Current Liabilities 6,072 7,514 8,903 Non-Current Liabilities Rolling overdraft 2,090 2,100 2,500 Finance Lease - Vehicle 13,150 13,300 13,500 Total Non-current Liabilities 15,240 15,400 16,000 TOTAL LIABILITIES 21,312 22,914 24,903 NET ASSETS 30,335 26,828 23,125 Equity Opening balance 26,828 23,125 14,500 Funds introduced - - - Profit / Loss 10,481 15,125 19,190 Drawings (6,974) (11,422) (10,565) CLOSING EQUITY 30,335 26,828 23,125 Part B Using the horizontal analysis approach, you are required to analyse the data and then highlight three areas that the owners need to look into in more detail. You must also provide a brief explanation to support why each of the three areas you highlight need to be investigated. 1. 2. 3. Part C Using the financial information provided for Cooks & Cleans Limited, you are now required to use ratios to analyse the financial statements. You may find it useful to know the following 20X4 balance sheet figures: · Total Assets - 44,880 · Accounts Receivable – 2,745 CCL has also given a further break-down of their sales: Sales Breakdown 20X7 20X6 20X5 Cash Cooking & Cleaning Income 120,140 148,669 151,083 Credit Cooking & Cleaning Income 67,578 39,520 26,660 Total Cooking & Cleaning Income 187,718 188,189 177,743 Task: Using the following table, you MUST calculate the ratio for 20X7, 20X6 and 20X5. Your final answer should be stated in the green box. In the grey box you MUST provide an evaluation and recommendation based on your findings: Ratio Formula 20X7 20X6 20X5 Gross profit margin (Gross Profit / Sales) x 100 [type your answer here] [type your answer here] [type your answer here] Evaluation and Recommendation: Ratio Formula 20X7 20X6 20X5 (Net Profit /Sales) x 100 [type your answer here] [type your answer here] [type your answer here] Net profit margin Evaluation and Recommendation: Ratio Formula 20X7 20X6 20X5 Current ratio (Current Assets / Current Liabilities) [type your answer here] [type your answer here] [type your answer here] Evaluation and Recommendation: Ratio Formula 20X7 20X6 20X5 Working capital Current Assets - Current Liabilities [type your answer here] [type your answer here] [type your answer here] Evaluation and Recommendation: Ratio Formula 20X7 20X6 20X5 Accounts receivable turnover Credit Sales / Average Accounts Receivable* [type your answer here] [type your answer here] [type your answer here] Evaluation and Recommendation: Ratio Formula 20X7 20X6 20X5 Debtor days (Accounts receivable x 365) / Sales [type your answer here] [type your answer here] [type your answer here] Evaluation and Recommendation: * Average Accounts Receivable - this is the Accounts Receivable balance at the start of the year plus the Accounts Receivable balance at the end of the year, divided by two.