Analysis of Santana Plc's Financial Performance

The assignment provides a detailed analysis of Santana Plc's operational performance and return on capital employed (ROCE). It compares the company's financial metrics, including operating profit margin and gearing ratio, to those of other corporations. The results show that Santana Plc has better returns over capital invested in operational activities and adequate growth and efficiency compared to other firms.

Financial Accounting

TABLE OF CONTENTS
TASK 1............................................................................................................................................1
Usefulness of IASB Conceptual Framework for the investors of Ford..................................1
TASK 2............................................................................................................................................2
A. Presenting a consolidated Income statement of Contentin PLC for the year ended 31st
December 2016.......................................................................................................................2
B. Drafting the statement of financial position for Contenin Plc as on 31st December 20163
C. Critical overview of the financial statements of Contentin Plc.........................................4
TASK 3............................................................................................................................................5
Interpretation of the growth, profitability and efficiency of Santana Plc among shareholders5
REFERENCES................................................................................................................................8

TASK 1
Usefulness of IASB Conceptual Framework for the investors of Ford
To enhance the operational performance of Ford, the professionals in this organisation
need to determine the importance of the conceptual framework facilitated by IASB. Therefore,
the operational perspective of this standard or board is that they facilitate the universally
accepted framework for presenting the annual financial informations of firm. This will be helpful
for the business in terms of enhancing the efficiency as well as attracting the large numbers of
investors to the organisation (Zhang and Andrew,2014). The disclosure of data set is helpful fir
the internal stakeholders in terms of redesigning the policies, planning and reallocating the costs
over every business operations.
Illustration 1: Usefulness of conceptual framework for the various users
(Source: Conceptual framework for financial reporting, 2017)
However, it is quite necessary that an investor must consider the conceptual framework
of IASB before investing in any organisation. The main objective of such boards is to facilitate
accurate financial statement which are being prepared and formed on the basis of authenticated
1

data. The data set is consists of various informations such as profits earned by organisation
during a period as well as capital retention. Thus, it will help the investors in terms of analysing
the profitability of Ford in the long run and the return they will have over their investments.
Therefore, there are presentations relevant with Comprehensive income statements, financial
positions, change in equity as well as cash flow statement of the business (van Rensburg,
Coetzee and Schmulian, 2014). These are the helpful tools that will attract shareholders and will
raise the capital structure of the firm.
In order to analyse the investors of this Automotive industry which are enhancing the
organisation fund and that is being fruitful for the operational activities. In accordance with the
past performances of this organisation it can be said that it has wide ranges of vehicles and
spread all over the world. Here, the periodical annual disclosure of the financial statements play
main role in enhancing the operational activities of Ford as well as strengthening the capital
structure of this organisation (Bauer, O'Brien and Saeed, 2014). Therefore, with the influences of
such Standards and Boards the business will be beneficial in terms of acquiring the adequate
revenue, capital funds in terms of satisfying the operational needs.
TASK 2
A. Presenting a consolidated Income statement of Contentin PLC for the year ended 31st
December 2016
Comprehensive income statement Contentin Plc as on 31st December 2016
Particulars (-) (+) Amount
Sales Revenue 28000000
Less: COGS 16200000
Depreciation 50000 16250000
Gross Profit 11750000
Operating Expenses
Distribution cost 2580000 2580000
Administrative costs 3840000 3840000
Depreciation 50000
Total operating Expenses 5280000
2

Operating Income
Interest Expenses 240000
Interest paid on loans 180000
Earning before tax 5700000
Income tax 1200000
Earning After tax 4500000
Working Notes:
1. Depreciation adjustments
Particulars Amount
Depreciation 320000
COGS 16000000 200000 16200000
Distribution costs 2500000 80000 2580000
Administrative Expenses 3800000 40000 3840000
2. Revaluation:
Particulars Amount
Property 800000
sold for 600000
Accumulated depreciation 1800000
Revaluation surplus 200000 100000
200000
-1600000
-1400000
B. Drafting the statement of financial position for Contenin Plc as on 31st December 2016
Financial Position of Contentin Plc
Particulars Amount (000) Amount (000)
Assets
3

Inventories 1000
Trade receivables 1700
Allowance 1680
bad debts 40 3340
Cash at bank and in hand 1450
Total Current assets 5790
Income tax 1200
Land 1500
Property plant and equipments 1400
Deferred taxation 2600
Provision of deferred taxation 1800 4400
Revaluation surplus 1000
Total Assets 15290
Liabilities
Current liabilities
Income tax 1200
Current taxation 20
Total Current liabilities 1220
Non- Current liabilities
Trade Payable 1500
Interest paid on loan 180
Interest 240
Net income 4500
Total Non- Current liabilities 6420
Owner's equity
Ordinary shares 6000
Retained earnings 1100
share premium 1500
4

Dividend paid -950
Total equity 7650
Total Liabilities 15290
Workings for shareholder's equity:
Particulars 1 2
Ordinary shares 3000000 6000000
Retained earnings 1100000 1100000
share premium 1500000 1500000
Dividend paid 950000 -950000
Total Equity 7650000
C. Critical overview of the financial statements of Contentin Plc
Gross Profit: In accordance with the Gross profit earned by Contentin Plc which is
amounted to 11750000. It has been determined with measuring the sales of the period which is
amounted to 28000000 and deductible from the cost of goods sales. In consideration with the
adjustment incurred where 320000 of depreciation amount has been split at the ratio of 5: 2: 1
among COGS, administrative and distributional costs. Therefore, the amount of such
depreciation was added to the COGS and which was amounted to 16200000. There has been
further deduction of the depreciation of 50000 which are incurred over the property at the time of
sales.
Profit from operations: The Contentin Plc has acquired the operating income for
6470000 which was on the basis of Distribution and administrative costs. Therefore, it indicates
that the firm operational performance is on correct phase and ringing the adequate returns.
Profit before taxation: The firm has acquire earning before tax for 5700000 which was
on the basis of deducting interest over loans.
Profit for the year: The Contentin Plc has gained the profit after tax is amounted to
4500000 as per the income tax of 1200000 has been deducted from the profit retained by the
business. In consideration with the profit earned by firm it can be said that the firm is having
profitable growth and which is reflecting in the operations of the business.
5

Other comprehensive income: The Contentin Plc has made sale of property which has
brought the rise in the funds.
TASK 3
Interpretation of the growth, profitability and efficiency of Santana Plc among
shareholders
Santana Plc C1 C2 C3
Particulars
Formul
a
201
5
Rat
io
201
6
Ra
tio
201
5
Rat
io
201
6
Rat
io
201
5
Rat
io
201
6
Rat
io
201
5
Rat
io
201
6
Rat
io
Gross profit
margin
Gross
Profit
209
3
32.
00
%
213
0
31.
00
%
103
8
25.
01
% 845
21.
99
% 488
23.
00
% 400
19.
98
% 780
26.
00
% 576
20.
93
%
Net
sales
654
0
687
0
415
0
384
2
212
2
200
2
300
0
275
2
Operating
Profit
Margin
Operati
ng
profit 893
13.
65
%
120
4
0.1
752
547
307 570
13.
73
% 401
10.
44
% 20
0.9
4% 16
0.8
0% 360
12.
00
% 205
7.4
5%
Net
sales
654
0
687
0
415
0
384
2
212
2
200
2
300
0
275
2
ROCE EBIT 817
15.
87
%
120
2
20.
30
%
12.
20
%
11.
80
%
9.7
0%
9.5
0%
12.
10
%
10.
10
%
Capital
employ
ed
514
7
592
0
Gearing
Ratio
Total
liabiliti
es
639
9
1.2
432
484
648
8
1.0
959
459
6

943 459
Total
equity
514
7
592
0
Commentary: In accordance with the operations of these organisations it can be said that
Santana Plc is having fruitful efficiency in respect of all the financial data and the ratios'
analysis. In order to evaluate the gross profit margin ion the basis of sales revenue and costs of
goods sold by these industries in the financial period 2015 and 2016. The GP of Santana plc in
the year 2015 and 2016 as 32% and 31%. Therefore, it can be said that in the current year the
firm has reduction in the total revenue or sales. It can be said that the business is not able to
attract the consumers and make sales as compared with the previous period. In accordance with
the GP of other companies such in both the years such as C1 is having 25.01% and 21.99%, C2
is having 23% and 19.98% and C3 is having 26% and 20.93%.
In order to analyse the operating profit of all the firms on the basis of their operating
profit for the period 2015 and 2016. Santana Plc has OP Margin as 13.65% and 17.53% it can be
said that in the current year the operational income the firm has bull while on the other side it can
be said that there has bee reduction in the operating expenses of the business. Thus, in
accordance with the operations of the firm. In accordance with the other corporations the
operating profit margin has been analysed for the same years as C1 is having 13.73% and
10.44%, C2 is having 0.94% and 0.80% and C3 is having 12% and 7.45%. Hence, in context
with all these firm the operational performance of Santana Plc is better as they are having
increment in the OP margin.
The ROCE of all the firms can be analysed as per the returns the firm have over the
capital investments in the operational activities. Therefore, in accordance with the Santana Plc in
the year 2015 the ROCE was 15.87% and in the year 2016 it was 20.30%. Thus, there is
increment in the level of returns over the capital employees which means that the firm is having
profitable returns form the amount they have investment in the operational activities of the
business. In accordance with the other ventures the ROCE of the same period can be analysed as
C1 is having 12.20% and 11.80%, C2 is having 9.70% and 9.50% and C3 is having 12.10% and
7

10.10%. Therefore, it can be said that the Santana Plc is having better returns over the capital
invested by them in the operational activities.
Gearing ratio of the firm in the year 2015 and 2016 as 1.24 and 1.09 which indicates that
in the current year there has been increment in the total liabilities of the firm (Gearing ratio,
2017). Therefore, in accordance with the overall performance of the firms it can be said that
Santana Plc is having adequate growth and efficiency as compared with other corporations.
Thus, it will be fruitful for the investors to make the investments in such business.
8