Hardy is a public listed manufacturing company. Its summarised financial statements for the year ended 30 September 2010 (and 2009 comparatives) are: 2010 RM’000 2009 RM’000 Revenue 29,500 36,000 Cost of sales (25,500) (26,000) Gross profit 4,000 10,000 Distribution costs (1,050) (800) Administrative expenses (4,900) (3,900) Investment income 50 200 Finance costs (600) (500) Profit (loss) before taxation (2,500) 5,000 Income tax (expense) relief 400 (1,500) Profit (loss) for the year (2,100) 3,500 Income statements for the year ended 30 September: Statements of financial position as at 30 September: 2010 2009 RM’000 RM’000 RM’000 RM’000 Assets Non-current assets Property, plant and equipment 17,600 24,500 Investments at fair value through profit or loss 2,400 20,000 4,000 28,500 Current assets Inventory and work-in-progress 2,200 1,900 Trade receivables 2,200 2,800 Tax asset 600 nil Bank 1,200 6,200 100 4,800 Total assets 26,200 33,300 Equity and liabilities Equity Equity shares of $1 each 13,000 12,000 Share premium 1,000 nil Revaluation reserve nil 4,500 Retained earnings 3,600 17,600 6,500 23,000 Non-current liabilities Bank loan 4,000 5,000 Deferred tax 1,200 5,200 700 5,700 Current liabilities Trade payables 3,400 2,800 Current tax payable nil 3,400 1,800 4,600 Total equity and liabilities 26,200 33,300 The following information has been obtained from the Chairman’s Statement and the notes to the financial statements: ‘Market conditions during the year ended 30 September 2019 proved very challenging due largely to difficulties in the global economy as a result of a sharp recession which has led to steep falls in share prices and property values. Hardy has not been immune from these effects and our properties have suffered impairment losses of $6 million in the year.’ The excess of these losses over previous surpluses has led to a charge to cost of sales of $1·5 million in addition to the normal depreciation charge. ‘Our portfolio of investments at fair value through profit or loss has been ‘marked to market’ (fair valued) resulting in a loss of $1·6 million (included in administrative expenses).’ There were no additions to or disposals of non-current assets during the year. ‘In response to the downturn the company has unfortunately had to make a number of employees redundant incurring severance costs of $1·3 million (included in cost of sales) and undertaken cost savings in advertising and other administrative expenses.’ ‘The difficulty in the credit markets has meant that the finance cost of our variable rate bank loan has increased from 4·5% to 8%. In order to help cash flows, the company made a rights issue during the year and reduced the dividend per share by 50%.’ ‘Despite the above events and associated costs, the Board believes the company’s underlying performance has been quite resilient in these difficult times.’ Calculate the following "underlying" ratio, those of 2010 from the additional information. 1)Operating profit margin(not net profit margin) 2)Average inventory turnover 3)Pre tax return on equity *Ratios should be calculated as per ACCA formula and examiers' report.
Hardy is a public listed manufacturing company. Its summarised financial statements for the year ended 30 September 2010 (and 2009 comparatives) are:
|
|
2010 RM’000 |
2009 RM’000 |
|
Revenue |
29,500 |
36,000 |
|
Cost of sales
|
(25,500) |
(26,000) |
|
Gross profit
|
4,000 |
10,000
|
|
Distribution costs |
(1,050) |
(800) |
|
Administrative expenses
|
(4,900) |
(3,900) |
|
Investment income |
50 |
200 |
|
Finance costs |
(600) |
(500) |
|
Profit (loss) before
|
(2,500) |
5,000 |
|
Income tax (expense) relief
|
400 |
(1,500) |
|
Profit (loss) for the year |
(2,100) |
3,500 |
Income statements for the year ended 30 September:
|
|
2010 |
2009 |
|
|
RM’000 |
RM’000 |
RM’000 |
RM’000 |
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Property, plant and equipment |
17,600 |
|
24,500
|
|
|
Investments at fair value through profit or loss |
2,400 |
20,000 |
4,000 |
28,500 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Inventory and work-in-progress |
2,200 |
|
1,900 |
|
|
Trade receivables |
2,200 |
|
2,800 |
|
|
Tax asset |
600 |
|
nil |
|
|
Bank |
1,200 |
6,200 |
100 |
4,800 |
|
Total assets |
|
26,200 |
|
33,300 |
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
Equity |
|
|
|
|
|
Equity shares of $1 each |
13,000 |
|
12,000
|
|
|
Share premium |
1,000 |
|
nil |
|
|
Revaluation reserve |
nil |
|
4,500 |
|
|
|
3,600 |
17,600 |
6,500 |
23,000 |
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
Bank loan |
4,000 |
|
5,000 |
|
|
|
1,200 |
5,200 |
700 |
5,700 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade payables |
3,400 |
|
2,800 |
|
|
Current tax payable |
nil |
3,400 |
1,800
|
4,600 |
|
Total equity and liabilities |
|
26,200 |
|
33,300 |
The following information has been obtained from the Chairman’s Statement and the notes to the financial statements:
‘Market conditions during the year ended 30 September 2019 proved very challenging due largely to difficulties in the global economy as a result of a sharp recession which has led to steep falls in share prices and property values. Hardy has not been immune from these effects and our properties have suffered impairment losses of $6 million in the year.’
The excess of these losses over previous surpluses has led to a charge to cost of sales of $1·5 million in addition to the normal
‘Our portfolio of investments at fair value through profit or loss has been ‘marked to market’ (fair valued) resulting in a loss of $1·6 million (included in administrative expenses).’
There were no additions to or disposals of non-current assets during the year.
‘In response to the downturn the company has unfortunately had to make a number of employees redundant incurring severance costs of $1·3 million (included in cost of sales) and undertaken cost savings in advertising and other administrative expenses.’
‘The difficulty in the credit markets has meant that the finance cost of our variable rate bank loan has increased from 4·5% to 8%. In order to help cash flows, the company made a rights issue during the year and reduced the dividend per share by 50%.’
‘Despite the above events and associated costs, the Board believes the company’s underlying performance has been quite resilient in these difficult times.’
Calculate the following "underlying" ratio, those of 2010 from the additional information.
1)Operating profit margin(not net profit margin)
2)Average inventory turnover
3)Pre tax return on equity
*Ratios should be calculated as per ACCA formula and examiers' report.
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