MSC Accounting and Finance: Financial Analysis and Cash Budgeting

MSC Accounting and Finance

Table of Contents
Question 2........................................................................................................................................3
(a) Preparation of Income statement and balance sheet TAN Plc as at 31st December, 2021.....3
(b) Ratio Calculations..................................................................................................................4
(c) Advise to current and potential shareholders of TAN Plc on its financial ratio results.........5
Question 3........................................................................................................................................7
(a) Preparation of cash budget of six months from October 2022 to March 2023......................7
(b) Advise to management of AMF Ltd on strategies they need to adopt in order to properly
manage cash flow from period October 2022 to March 2023.....................................................8
REFERENCES................................................................................................................................1

Question 2
(a) Preparation of Income statement and balance sheet TAN Plc as at 31st December, 2021
Income Statement
For the year ended 31st December, 2021
Particulars Details Amount
Sales Revenue 150000
Less Cost of Sales:
Opening Inventory 15000
Add Purchases 60000
Less Closing inventory 40000 35000
Gross Profit 115000
Operating expenses:
Bills expenses 37500 - 12000 +
6500 32000
Salaries expenses 33000
Less Total operating expenses 65000
Net Income 50000
Balance sheet
As at 31st December 2021
Particulars Details Amount
ASSETS:
Fixed assets
Properties 45000
Machines 30000 75000
Current assets
Inventory 40000
Cash on hand 37500
Debtors 22000

Prepayments 75000 + 12000 87000 186500
Total assets 261500
Equity and Liabilities
Current liability
Creditors 55000
Accruals 37500 + 6500 44000
Total current liabilities 99000
Equity
Opening Share Capital 112500
Add Current Net income 50000
Closing equity 162500
Total Equity and liabilities 261500
(b) Ratio Calculations
Particulars Formula 2021
Profitability Ratio
Gross Profit 115000
Net Profit 50000
Total Assets 261500
Current liabilities 99000
Net Sales 150000
Capital employed Total assets - Current liabilities 162500
Gross Profit Margin Gross profit/ Net sales * 100 77%
Net Profit Margin Net Profit / Net sales * 100 33%
Return on Capital
employed Net profit / Capital employed * 100 31%
Liquidity Ratio