Financial Accounting: Ratio Analysis, Income Statement, Statement of Changes in Equity, and Financial Position

Financial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Section A .........................................................................................................................................3
Question – 1 ....................................................................................................................................3
Ratio analysis .............................................................................................................................3
Part B ..............................................................................................................................................7
Question B1: ...................................................................................................................................7
1) Income statement of Giorgio Plc ...........................................................................................7
2) Statement of changes in equity: .............................................................................................7
3) Statement of Financial position: ............................................................................................8
Question B2: ...............................................................................................................................9
1) Grazyna Ltd cash budget .......................................................................................................9
2. Grazyna Ltd profit budget.....................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial accounting refers to the process of presenting the financial reports to the
internal or external users. It is utilized in big company for measuring the monetary performance.
It aids to evaluate the difficulties that is faced by the businesses enterprises. This report is about
the ASOS Plc company to measure the financial position. The ASOS Plc company is an retail
organisation which indulge such as investment related business. It is a multinational fashion and
beauty retailer. It was established in the year 2000 in UK (Allen, Aselta, and Engel, 2019) . It
has several branches in many countries and includes 850 brands deals in garments and
accessories. In the first section company has done deep study on the accounting ratios and their
impact on the organisation. Further, company has made the financial statements from the trial
balance of the organisation.
MAIN BODY
Section A
Question – 1
Ratio analysis
Profitability ratio
1. Return on capital employed: This ratio show that how organisation is able to generate its
revenue by using the capital efficiently. It denotes how organisation is managing its profit from
the mixture of the debt and equity
In 2020 Return on capital employed= Profit before interest and tax / capital employed *100
= 151/1621*100
= 9.31%
In 2021 = 190/2068*100
= 9.18%
Comments: From the analysis it is determined that the return on capital employed in 2020 is
9.31% which is more as compared to the year 2021. It means in the present year company is
getting less returns from the investment. It means company debts is much higher as compared to
owners equity(Astuty, and Pasaribu, 2021).

2. Net profit margin: It identifies the relationship between the sales and the net profit of the
organisation. It indicates the how much revenue can be earned from the sales.
In 2020 Net profit ratio= Net profit/ sales
= 151/3264*100
= 4.62%
In 2021 = 190/3911*100
= 4.85%
Comments: The net profit ratio in 2021 is 4.85 % and it is quite higher than the net profit ratio
of 2020. It shows the company has generate more sales which increases the profit of the
company and minimize the direct or indirect expenses (Banker, Huang, and Zhao, 2021)
(,Bertuzi, and Silva, 2020). Higher the net profit ratio is good for the organisation it indicates the
ability of the company to improve the cost efficiency of the product.
3. Asset turnover ratio: It is the accounting relativity between the total assets of the enterprise
and the sales of the organisation.
In 2020 Asset turnover ratio = Total assets / sales *100
= 1990/3264
= 60.96%
In 2021 = 2885/3911*100
= 73.76 %
Comments : The assets turnover ratio of the organisation in 2021 is 73.6 % and it is 10% higher
from the ratio in 2020. It shows that organisation has employed the assets to earn the profit. In
this the ratio has increased it indicates that organisation is utilizing the assets more effectively to
produce the income(.Cagle, 2020). If the company has high ratio it means organisation is
performing better as against with the lower assets turnover ratio. This information is used by the
external users or investors for getting the idea about the assets.
Working capital ratio
1. Inventory days: In 2021 = Average inventory * 365 / cost of goods sold
= 699.5*365/2134
= 115 days