QUESTION 1.You are a financial analyst reviewing the draft financial statements of Speedy Coaches Ltd with a view to purchasing the company and have been given the following information. Income statements for the year ended 30 June 20212020 £'000£'000Revenue32,80029,459Cost of sales(17,855)(15,840)Gross profit14,94513,619Operating expenses(11,680)(10,477)Depreciation(1,198)(1,063)Operating profit2,0672,079Interest(74)(94)Profit before taxation1,9931,985Taxation(634)(601)Profit for the year1,3591,384 Statements of financial position as at 30 June 20212020 £'000£'000ASSETS Non-current assets Property, plant and equipment10,3008,720Current assets Inventories750701 Trade receivables597436 Cash407279 1,7541,416 Total assets12,05410,136 Current liabilities Trade payables551652 Other payables and accruals390480 Taxation225125 1,1661,257 Total assets less current liabilities10,8888,879 EQUITY AND LIABILITIES Equity Ordinary share capital (£1 shares, fully paid)7,5006,500 Retained earnings2,7381,379 10,2387,879 Non-current liabilities Borrowings – Bank loan6501,000 Total equity and non-current liabilities10,8888,879 Required (show your workings, you may refer to the formulae sheet at the end of the paper)a) Complete the financial statements by preparing the Statement of Cashflows for 2021. b) Calculate least five ratios covering profitability, efficiency, liquidity and gearing. c) Comment on the financial health of Speedy Coaches Ltd, summarising your findings from b) including a recommendation about whether or not to make the purchase. d) Discuss the limitations of ratio analysis and identify any further information that may be useful.

The draft financial statement of Speedy Coaches is given to us for the year ended 2020 & 2021.…

Answered: Complete the financial statements by…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter1: The Role Of Accounting In Business

Section: Chapter Questions

Problem 1.3.5MBA: Return on assets The financial statements of The Hershey Company (HSY) are shown in Exhibits 6...

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QUESTION 1.

You are a financial analyst reviewing the draft financial statements of Speedy Coaches Ltd with a view to purchasing the company and have been given the following information.

Income statements for the year ended 30 June
		2021	2020
		£'000	£'000
Revenue	32,800	29,459
Cost of sales	(17,855)	(15,840)
Gross profit	14,945	13,619
Operating expenses	(11,680)	(10,477)
Depreciation	(1,198)	(1,063)
Operating profit	2,067	2,079
Interest	(74)	(94)
Profit before taxation	1,993	1,985
Taxation	(634)	(601)
Profit for the year	1,359	1,384

Statements of financial position as at 30 June
		2021	2020
		£'000	£'000
ASSETS
Non-current assets
	Property, plant and equipment	10,300	8,720
Current assets
	Inventories	750	701
	Trade receivables	597	436
	Cash	407	279
		1,754	1,416

Total assets	12,054	10,136

Current liabilities
	Trade payables	551	652
	Other payables and accruals	390	480
	Taxation	225	125
		1,166	1,257

Total assets less current liabilities	10,888	8,879


EQUITY AND LIABILITIES
Equity
	Ordinary share capital (£1 shares, fully paid)	7,500	6,500
	Retained earnings	2,738	1,379
		10,238	7,879

Non-current liabilities
	Borrowings – Bank loan	650	1,000

Total equity and non-current liabilities	10,888	8,879

Required (show your workings, you may refer to the formulae sheet at the end of the paper)

a) Complete the financial statements by preparing the Statement of Cashflows for 2021.

b) Calculate least five ratios covering profitability, efficiency, liquidity and gearing.

c) Comment on the financial health of Speedy Coaches Ltd, summarising your findings from b) including a recommendation about whether or not to make the purchase.

d) Discuss the limitations of ratio analysis and identify any further information that may be useful.

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