Capital Budgeting and Cash Flow Analysis

This assignment provides a comprehensive example of capital budgeting and cash flow analysis. It includes a detailed calculation of net present value (NPV), internal rate of return (IRR), and payback period for a project with initial investment of £40 million and salvage value of £0. The cash flows are calculated over 5 years, with sales revenue, direct material, direct labor, fixed overhead apportioned, and variable overhead costs. The assignment also includes a detailed breakdown of the calculations, including cumulative cash flow and discounted cash flow, to facilitate understanding of the concepts.

Running head: FINANCIAL AND MANAGEMENT ACCOUNTING
Financial and Management Accounting
Name of the Student
Name of the University
Authors Note
Course ID

1FINANCIAL AND MANAGEMENT ACCOUNTING
Table of Contents
Answer to Case A:.....................................................................................................................2
Answer to requirement A:..........................................................................................................2
Answer to requirement B:..........................................................................................................4
Brief overview of organizations and business strategy:.............................................................4
Review of financial performance:..............................................................................................5
Profitability Ratio:......................................................................................................................5
Liquidity ratio:...........................................................................................................................7
Solvency Ratio:........................................................................................................................10
Efficiency Ratio:......................................................................................................................12
Answer to Case B1:..................................................................................................................15
Answer to A:............................................................................................................................15
Answer to B:............................................................................................................................15
Answer to C:............................................................................................................................15
Reference List:.........................................................................................................................17
Appendix:.................................................................................................................................20
Appendix A:.............................................................................................................................20
Appendix B:.............................................................................................................................20
Appendix C:.............................................................................................................................21
Appendix D:.............................................................................................................................22

2FINANCIAL AND MANAGEMENT ACCOUNTING

3FINANCIAL AND MANAGEMENT ACCOUNTING
Answer to Case A:
Answer to requirement A:
The price earnings are one of the most widely used tools for making the selection of
stock. The price earnings are derived by dividing the current market price of the stock by its
earnings per share (Scott 2015). The price earnings represent the amount of money an
individual is ready to pay for each of the unit of worth earnings of the firm. As evident from
the computation, it is noticed that the price earnings of AG Barr Plc stood 1630.929 whereas
the Britvic on the other hand reported some price earnings of 1104.915 respectively.
Taking into the considerations the earnings per share of AG Barr Plc it is noted that
the earnings per share reported by the company stood 30.78p while the earnings per share of
Britvic Plc stood 52.9p. On the other hand, the full year dividend paid by AG Barr Plc stood
14.40p while the full year dividend per share of Britvic stood 26.5p per share. Overall, the
differences in the stock price between the AG Barr Plc and Britvic is higher amount of
current market price reported by Barr Plc over Britvic (Schaltegger and Burritt 2017).
An organization with higher amount of earnings per share ratio is capable of
producing significant amount of dividend for the investors or it may return the funds back
into the business for generating more amount of growth (Williams 2014). An assertion can be
bought forward by stating that the stock price of Barr plc is overprice since the price earnings
ratio reported by the company stood higher at 1630.929. The stock with higher price earnings
can be overprice and the dividend yield generated by Barr Plc is relatively lower as the
company reported the dividend yield of 0.029%. On the other hand, price earnings for Britvic
in comparison to Barr Plc stood relatively higher and it can be inferred that the dividend yield
for Britvic is comparatively higher than Barr Plc.

4FINANCIAL AND MANAGEMENT ACCOUNTING
In either of the case, a higher amount of ratio reflects a worthwhile investment based
on the market price of the stock (Warren and Jones 2018). Similarly, in the event of Barr Plc
the higher amount of price earnings can be a reflector of producing higher dividend for its
investors however with lower earnings per share reported the dividend yield that has been
reported stood 0.029%. Making a long term investment in Britvic is more suitable than
making an investment in Barr Plc. This is because the dividend yield is higher for Britvic
since the company is worth for long term return to its shareholders than Barr Plc.
Dividend coverage ratio can be defined as the ratio that measures the earnings of the
organizations over the dividend paid to the shareholders (Henderson et al. 205). The dividend
coverage ratio derived for Barr Plc stood 2.13 while the Britvic dividend coverage stood 1.99.
For an individual shareholder they would be required to pay a higher amount for a respective
share to derive a dividend of 1.99. On the other hand, Barr plc stock price of 502 is viewed as
overpriced since the dividend coverage reported stood relatively higher of 2.13. An
organization with higher amount of dividend coverage ratio reflects a situation where the
company has little difficulty in paying off its preferred dividend requirements. Similarly, Barr
Plc has reported a higher dividend coverage ratio in comparison to Britvic. With higher
amount of dividend coverage, it is understood that Barr Plc might be facing little difficulty in
paying off its shareholders the preferred dividend requirements.
The dividend yield or in other words is the dividend price ratio of the share is the
dividend per share divided by the price for each share (Weygandt, Kimmel and Kieso 2015).
The dividend yield represents the organizations total amount of yearly dividend payments
divided by the present market capitalization based on the assumption that the number of share
is constant.

5FINANCIAL AND MANAGEMENT ACCOUNTING
The dividend yield reported by Barr Plc is relatively lower than Britvic representing a
lower return to the shareholder. This considers the sign of clear financial health and
confidence for the organization to pay out its dividends. Gauging into the dividend yield Barr
Plc and Britvic it is understood that Britvic total yearly dividend payments in respect of its
market capitalization is constant based on the total number of shares reported by it. The
overall assessment of both the firms provides that the differences in the price is largely
because of the overvalued stock price of Barr Plc in comparison to Britvic.
Note: The computation of the investment ratio has been provided in Appendix A.
Answer to requirement B:
Brief overview of organizations and business strategy:
Britvic plc. is the British Producer of soft drinks having its base on Hempstead. The
company is listed on the London stock exchange and it is one of the constituent of the FTSE
250 Index (Britvic.com 2018). A large part of its operations is concentrated in the United
Kingdom and Ireland the organizations overseas operations have expanded and exports its
products to more than 50 countries. On the other hand, AG Barr Plc is Scottish manufacturer
of soft drink having its base on Cumbernauld, North Lanarkshire (Agbarr.co.uk 2018). The
company manufactures the popular Scottish drink and it is listed on the London stock
exchange with the constituent of FTSE 250 Index.
The business strategy for Britvic is understanding the needs of consumer by
increasing the retail partners in order to increase the sale of soft drinks. Britvic undertakes the
international approach of sourcing the required raw materials to manufacture the soft drinks.
The business strategy for Barr Plc is based on placing focus on strongly differentiated brands.
The business strategy of Barr Plc is focussed on growing the driven partnerships and
leveraging its strength with team.

6FINANCIAL AND MANAGEMENT ACCOUNTING
Review of financial performance:
Note: Refer to Appendix B for calculated financial Ratios:
Profitability Ratio:
The profitability ratio are regarded as the financial metrics which is used to determine
the ability of the business to derive earnings in respect of the earnings and other important
costs that is occurred during the particular period of time (Narayanaswamy 2017). Under the
profitability ratio the gross profit ratio is the profitability ratio that represents the association
between the gross profit and the total net sales reported by the firm. As evident from the gross
profit ratio for AG Barr Plc the company reported a gross profit ratio of 46.95 while the
Britvic reported a gross profit ratio of 53.94%. Britvic reported a strong growth in revenue of
£1,540.8m in spite of the challenging market conditions while AG Barr reported a mere 0.6%
rise in revenue to £257.1 million.
The net profit ratio is computed to determine the percentage of net profit ratio after
tax in respect to net sales for both Britvic and Barr Plc. The net profit margin for Barr plc
stood 13.85% while the net profit margin for Britvic stood 8%. The lower net profit of Britvic
is largely because of the decline in the statutory profit after tax of 2.5%. The lower amount of
net profit is because of the cost incurred by the business that is associated to the three-year
business capability programme that commenced in the year 2016 (Gitman, Juchau and
Flanagan 2015). The lower net profit of Britvic is largely attributable to the cost incurred in
the capability programme as the company has installed new lines of production, new site for
warehousing and undertook major groundworks for final phase.
The rise in net profit margin for Barr Plc is largely because of the underlying basis of
growth delivered by the business of 1.5%. Furthermore, the company reported an expansion
of profit before tax and exceptional items of 7.1% with improved free cash flow. Barr Plc

7FINANCIAL AND MANAGEMENT ACCOUNTING
have successfully maintained the market share under the challenging market environment
with the company’s core carbonates business has delivered better performance (Marshall
2016). The international business has delivered double-digit revenue with the help of brand
development in its core markets.
The return on asset is computed for both Britvic and Barr Plc in order to measure the
efficiency of the organizations ability to generate the sales revenue from the total asset to
provide the management with an understanding of how well it is making use of the asset
(Caplan 2016). The return on assets for AG Barr Plc stood 12.92% whereas on the other hand
Britvic reported a return on assets of 7.01%. A higher return on assets of Barr Plc is largely
because of more than £12 million investment in the long term assets. Furthermore, the non-
current assets have increased slightly to £195.4 million after several years of sustained
investment in assets and infrastructure. The investment in asset have resulted Barr Plc in
maintaining a favourable position with the well-invested base of asset that are capable of
accommodating growth have increased by £1.7 million. However, the company has reported
an 8% return on assets but the company has reported 86% of revenue from their assets.
The return on equity represents the profitability ratio, which measures the ability of
the organization to produce profits from the shareholders’ investment in the company
(Appelbaum et al. 2017). The return on equity for Barr Plc stood 46.95% whereas for Britvic
the return on equity stood 40.75%. Britvic profit before taxation that are attributable to the
equity shareholders stood £138.8m while Barr Plc’s profit before taxation attributable to the
shareholder stood £35.6 million. With the increasing return on equity for Britvic, it can be
understood that the company is increasing ability of generating profit without requiring much
amount of capital.

8FINANCIAL AND MANAGEMENT ACCOUNTING
Gross Profit Margin Net Profit Margin Return on Assets Return on Equity
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
46.95%
13.85% 12.92%
19.58%
53.94%
8.00% 7.01%
40.75%
Profi tability
AG Barr Britvic
Figure 1: Figure representing Profitability Ratio
(Source: As Created by Author)
Liquidity ratio:
Liquidity ratio can be defined as the ratio that is used to gauge into the performance of
the organization in determining the ability of the organization to pay off its debts. The
liquidity ratio determines the ability of the organization to meet the both its current liabilities
and long-term liabilities become due (Kravet 2014). Under the liquidity ratio the current ratio
is largely used to provide an idea of the organizations to pay its liabilities from its assets. The
current ratio helps in determining the rough estimation of the organization health. The current
ratio for AG Barr Plc stood 1.414 whereas on the other hand the current ratio for Britvic
stood 0.927. The current ratio for AG Barr Plc indicates that liabilities that are due within the
span of a year are met by the company from its current assets. This represents that AG Barr
Plc has £1.50 of current assets for each of the £1 current liabilities and presumably, the
current assets is sufficient to meet its current liabilities that fall due within the span of one
year. On the other hand, Britvic reported a lower current ratio of 0.927 and it can be stated
that the firm may have trouble in meeting of its debt.

9FINANCIAL AND MANAGEMENT ACCOUNTING
Under the liquidity ratio, the quick ratio is computed for both the Britvic Plc and Barr
Plc. The quick ratio is used to measure how the company is able to meet its short-term
financial liabilities (Otley 2016). As evident the quick ratio for Barr Plc stood 1.109 whereas
Britvic reported a quick ratio of 0.783. The quick ratio of Barr Plc is relatively higher than
the Britvic representing that the company possess the ability of using its cash or quick ratio to
extinguish or meet its current liabilities quickly. The higher quick ratio is primarily because
of adjusted free cash flow for Britvic stood £54.5 million with an improvement of
£43.6millioin improvement over the figures reported last year.
Current Ratio Quick Ratio
1.414
1.109
0.927
0.783
Current & Quick Ratio
AG Barr Britvic
Figure 2: Figure representing Current & Quick Ratio
(Source: As Created by Author)
Times interest, earned ratio represents the coverage ratio that measures the ability of
the organization in meeting its debt payment (Chenhall and Moers 2015). As evident from the
computation the times interest earned ratio for Barr Plc stood 62.571 while Britvic reported a
times interest earned ratio of 6.558. Evidently a higher times interest ratio for Barr represents
that the company is better able to meet its debt from the operating revenue generated from its
operations. Despite the amount of debt reported by Barr Plc the company has the better

10FINANCIAL AND MANAGEMENT ACCOUNTING
ability of meeting its interest payment on debt. On the other hand, a lower times interest
earned ratio presumably represents lower ability of meeting its interest payment on its debt.
AG Barr Britvic
62.571
6.558
Time Interest Earned Ratio
Time Interest Earned Ratio
Figure 3: Figure representing Times Interest Earned
(Source: As Created by Author)
Cash ratio represents the ratio of the organizations total amount of cash and cash
equivalent in respects to its current liabilities (Eldenburg et al. 2016). Evidently the cash ratio
for Barr Plc stood 0.178 whereas for Britvic the cash ratio stood 0.264. The cash and cash
equivalent for Barr Plc stood 10.1 during the year 2017 while the cash and cash equivalent
for Britvic stood 82.5. The cash ratio for Britvic represents a more conservative look to cover
its liabilities than the Barr Plc.

11FINANCIAL AND MANAGEMENT ACCOUNTING
AG Barr Britvic
0.178
0.264
Cash Ratio
Cash Ratio
Figure 4: Figure representing Cash Ratio
(Source: As Created by Author)
Solvency Ratio:
The solvency ratio represents the measure of the various ratio, which is used to
measure the ability of the organization in meeting its long-term debts. Furthermore, the
solvency ratio quantifies the size of the organization after tax profit (Dashtbayaz,
Mohammadi and Mohammadi 2014). Under the solvency ratio the debt ratio is computed to
determine the extent of organizations leverage. The debt ratio for Barr Plc stood 0.340
whereas the debt ratio for Britvic stood 0.828. The lower amount of debt ratio for Barr plc is
primarily because of the constant fall in the debt interest which ultimately reflects the
improved debt profile. Barr plc have been successful in paying off its debt that enabled the
firm to transitioned towards an effective net cash position. The higher debt ratio for Britvic is
because of overall increase in net debt by £86.5million because of the acquisition of Bela
Ischia and East Coach. The net debt leverage for Britvic also increased two times from
previous year figure of 1.8 times.

12FINANCIAL AND MANAGEMENT ACCOUNTING
Debt to equity ratio represents the relative proportion of shareholder’s equity and the
amount of debt that is used to finance the asset of the organization (Smith 2017). The debt to
equity ratio for Barr Plc stood 0.516 whereas the debt to equity ratio for Britvic stood 4.816.
The higher amount of debt ratio for Britvic represents that the company has higher amount of
debt to equity which may not be sufficient for the organization to generate sufficient amount
of cash to meet its debt obligations. On the other hand, the debt equity ratio for Barr Plc stood
relatively lower representing that a higher proportion of cash and cash equivalent is generated
to meet its debt obligations.
The equity ratio is derived by dividing the organizations total liabilities from the
stakeholder’s equity (Oboh and Ajibolade 2017). As evident the equity ratio for Barr Plc
stood 0.660 whereas the equity ratio for Britvic 0.172. With lower amount of equity ratio
reported by Britvic represents that the total proportion of total assets which is financed by
stockholders in respect to the interest paid to the creditors. Consequently, the higher equity
ratio for Barr Plc is presumed that the company requires higher amount of equity from its
stockholders to finance its total assets.
Debt Ratio Debt-To-Equity Ratio Equity Ratio
0.000
1.000
2.000
3.000
4.000
5.000
6.000
0.340 0.516 0.6600.828
4.816
0.172
Solvency Ratio
AG Barr Britvic
Figure 5: Figure representing Solvency Ratio

13FINANCIAL AND MANAGEMENT ACCOUNTING
(Source: As Created by Author)
Efficiency Ratio:
The efficiency ratio is used to determine how well an organization make use of its
assets and liabilities (Theriou 2015). The days to sales inventory ratio represents the average
number of days taken by the company to sell of its average inventory that is held during the
particular accounting period. The day’s sales in inventory for Barr plc stood 46.294 while
Britvic reported days’ sales in inventory of 62.393. The valuation of inventory for Barr Plc is
judgemental due to the volatile nature of the raw materials commodity. A higher sale in
inventory reported by Britvic is primarily because of the reduced distribution.
Day’s receivables outstanding represents how well the organization is managing its
accounts receivables. The figures of days’ sales outstanding represent an index of the
relationship between the outstanding receivables and credit accounts sales attained over the
given time period (Liu and Liu 2015). The days receivable outstanding for Barr Plc stood
72.97 whereas the day’s sales outstanding for Britvic stood 81.069. The estimated amount of
total receivable outstanding or the average collection period for Barr Plc stood relatively
lower than Britvic Plc. Noticeably, Barr Plc has been successful in managing its accounts
receivables than Britvic who has higher collection period of 81 days to recover the
outstanding amount of sales receivables.
The days payable outstanding measures the organizations average payable period or
the time taken by the company to pay its invoices from the trade creditors (Reid and
Myddelton 2017). The days payable outstanding for Barr Plc stood 139.95 whereas the days
payable outstanding for Britvic stood 242.042. Evidently, the computations made represents
Britvic takes approximately 242 days to pay its outstanding invoices from the trade creditors
whereas Barr Plc relatively takes 139 days to pay its outstanding liabilities.

14FINANCIAL AND MANAGEMENT ACCOUNTING
Day Sales in Inventory Day Receivables Outstanding Days Payable Outstanding
0.000
50.000
100.000
150.000
200.000
250.000
300.000
46.294
72.972
139.952
62.393 81.069
242.042
Days Outstanding
AG Barr Britvic
Figure 6: Figure representing Days Outstanding
(Source: As Created by Author)
Asset turnover ratio represents the efficiency ratio to determine an organization ability
to generate the sales from its assets by comparing the net sales with the average total assets
(Theriou 2015). The asset turnover for Barr plc is higher than Britvic. For Barr Plc the asset
turnover ratio stood 0.933 while Britvic reported an asset turnover of 0.876. Compare to
Britvic, Barr Plc has been relatively efficient in generating higher proportion of sales from its
assets.
AG Barr Britvic
0.840
0.850
0.860
0.870
0.880
0.890
0.900
0.910
0.920
0.930
0.940 0.933
0.876
Asset Turnover
Asset Turnover Ratio

15FINANCIAL AND MANAGEMENT ACCOUNTING
Figure 7: Figure representing Asset Turnover
(Source: As Created by Author)
Overall, measuring the performance in terms of gross profit Britvic has though
reported a higher proportion of gross profit ratio. Additionally, the company has better
market performance with higher dividend yield ratio. Barr Plc has simultaneously reported
better after tax profit than Barr Plc. Barr plc has successful in managing its both short and
long term debt whereas Britvic has reported increasingly higher amount of debt ratio. On the
possible mergers and acquisition an assertion can be bought forward by stating that Britvic
can merge with Barr Plc as the company will be able to reduce its debt burden with Barr Plc
having reported a higher free cash flow in the previous accounting year.

16FINANCIAL AND MANAGEMENT ACCOUNTING
Answer to Case B1:
Answer to A:
The relevant cash outflow, inflow for making possible investment is computed, and
the same is illustrated in appendix C.
Answer to B:
The computation of payback period, net present value and internal rate of return for
possible investment in plant 2 is stated in appendix D.
Answer to C:
On undertaking, the decision regarding making an investment in plant 2 it is feasible
for the directors of Graham to make an investment. Taking into the considerations the sales
volume of 60,000 units over the period of five years it can be stated that a stable amount of
cash inflow can be derived for each year of the five-year period. The selling price per unit is
stated to be around £70 per unit. On the other hand, the initial investment for the directors of
Graham stood £40,00,000 with direct material being £4,80,000. The direct labour and the
direct labour approximately standing £420,000 and £300,000 respectively. The variable
overhead for the project stood £180,000 and the total amount of cash outflow being £109,
90,000 over the period of the five year.
The net cash flow from the operations for each of the five-year period stood £28,
20,000. The cost of capital for the project stood 12%. In the process of capital budgeting
payback period can be defined as the period of time that is needed to recoup the funds
expanded in the investment in order to reach the break-even point. As evident from the
current investment scheme the payback period in years stood 1.42 for investment scheme.
Therefore, on making an initial investment of £40,00,000 on the new plant the company

17FINANCIAL AND MANAGEMENT ACCOUNTING
would be able to get the return from the amount invested in project within the span of 1.5
years.
The net present value or in other words the net present worth represents the measure
of profit computed following the subtraction of present values of cash outflows that also
included the initial cost of the present value of cash inflow over the period of time. As
evident from the computations carried out in respect to the new investment project of
investing in machine, the net present value of the machine stood £61,65,469. The net present
value computed for the new project is derived by subtracting the present value of the cash
outflow of the project along with the initial amount of £40,00,000.
The internal rate of return can be defined as the metric that is used in the
determination of the profitability relating to the probable investments in the project (Liu and
Liu 2015). Internal rate of return represents the discount rate to determine the net present
value of the cash flow from the particular project. The internal rate of return on investment
represents the annualized effective compound rate of return of the project. As evident, the
internal rate of return for the new plant stood 65%.
On the basis of the evaluation performed an assertion can be bought forward by
stating that making an investment in the new project or in other words making an investment
in new plant would be feasible. This is because the payback period in years for the new plant
is 1.42 years. similarly, the net present value of the plant stood £61,65,469 with the internal
rate of return for the project standing 65%. As the advice to the management in important
assertion can be bought, forward by stating that making an investment in the new project
would be provide directors with better amount of cash inflow and relatively lower cash
outflow.

18FINANCIAL AND MANAGEMENT ACCOUNTING
Reference List:
Agbarr.co.uk. (2018). Soft drink brands | A.G. BARR soft drinks. [online] Available at:
https://www.agbarr.co.uk/ [Accessed 27 Feb. 2018].
Appelbaum, D., Kogan, A., Vasarhelyi, M. and Yan, Z., 2017. Impact of business analytics
and enterprise systems on managerial accounting. International Journal of Accounting
Information Systems, 25, pp.29-44.
Britvic.com. (2018). Home. [online] Available at: http://www.britvic.com/ [Accessed 27 Feb.
2018].
Caplan, D., 2016. Managerial Accounting Concepts and Techniques.
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society, 47, pp.1-13.
Dashtbayaz, M.L., Mohammadi, S. and Mohammadi, A., 2014. Strategic Management
Accounting. Research Journal of Finance and Accounting, 5(23), pp.17-21.
Eldenburg, L.G., Wolcott, S.K., Chen, L.H. and Cook, G., 2016. Cost management:
Measuring, monitoring, and motivating performance. Wiley Global Education.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.

19FINANCIAL AND MANAGEMENT ACCOUNTING
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Kravet, T.D., 2014. Accounting conservatism and managerial risk-taking: Corporate
acquisitions. Journal of Accounting and Economics, 57(2), pp.218-240.
Liu, Y. and Liu, C.K., 2015. Signature extraction from accounting ratios. U.S. Patent
Application 13/952,692.
Marshall, D., 2016. Accounting: what the numbers mean. McGraw-Hill Higher Education.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning
Pvt. Ltd..
Oboh, C.S. and Ajibolade, S.O., 2017. Strategic Management Accounting and decision
Making.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
Reid, W. and Myddelton, D.R., 2017. The meaning of company accounts. Routledge.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues,
concepts and practice. Routledge.
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Smith, S.S., 2017. Strategic Management Accounting: Delivering Value in a Changing
Business Environment Through Integrated Reporting. Business Expert Press.
Theriou, N.G., 2015. Strategic Management Process and the Importance of Structured
Formality, Financial and Non-Financial Information. European Research Studies, 18(2), p.3.
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.

20FINANCIAL AND MANAGEMENT ACCOUNTING
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting.
John Wiley & Sons.
Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.

21FINANCIAL AND MANAGEMENT ACCOUNTING
Appendix:
Appendix A:
Investment Ratio:
Particulars AG Barr Britvic
Stock Price A £502.00 £584.50
Dividend Per share B £0.14 £0.27
Earnings per share C £0.31 £0.53
Dividend Yield D = B/A 0.029% 0.045%
Dividend Cover Ratio E= C/B 2.138 1.996
Price - Earnings Ratio F=A/C 1630.929 1104.915
Appendix B:
Financial Ratios:
Profitability Ratio:
Particulars AG Barr Britvic
Sales Revenue A 257.1 1431.3
Gross Profit B 120.7 772
Net Profit C 35.6 114.5
Total Assets D 275.6 1634.4
Total Equity E 181.8 281
Gross Profit Margin F=B/A 46.95% 53.94%
Net Profit Margin G=C/A 13.85% 8.00%
Return on Assets H=C/D 12.92% 7.01%
Return on Equity I=C/E 19.58% 40.75%
Liquidity Ratio:
Particulars AG Barr Britvic
Current Assets A 80.2 722.6
Current Liabilities B 56.7 779.4
Inventories C 17.3 112.7
EBIT D 43.8 176.4
Interest Expenses E 0.7 26.9
Cash F 10.1 205.9

22FINANCIAL AND MANAGEMENT ACCOUNTING
Current Ratio G=A/B 1.414 0.927
Quick Ratio H=(A-C)/B 1.109 0.783
Time Interest Earned Ratio I=D/E 62.571 6.558
Cash Ratio J=F/B 0.178 0.264
Efficiency Ratio:
Particulars AG Barr Britvic
Inventories A 17.3 112.7
Cost of Sales B 136.4 659.3
Accounts Receivable C 51.4 317.9
Accounts Payable D 52.3 437.2
Sales Revenue E 257.1 1431.3
Total Assets F 275.6 1634.4
Day Sales in Inventory G=(A/B)x365 46.294 62.393
Day Receivables Outstanding H=(C/E) x 365 72.972 81.069
Days Payable Outstanding I=D/(B/365) 139.952 242.042
Asset Turnover Ratio J=E/F 0.933 0.876
Solvency Ratio:
Particulars AG Barr Britvic
Total Assets A 275.6 1634.4
Total Equity B 181.8 281
Total Liabilities C 93.8 1353.4
Debt Ratio D=C/A 0.340 0.828
Debt-To-Equity Ratio E=C/B 0.516 4.816
Equity Ratio F=B/A 0.660 0.172
Appendix C:
Cash Inflow and Cash Outflow
cash flow
Schedule:
Period
Particulars 0 1 2 3 4 5 TOTAL
Sales Volume (in
units) 60000 60000 60000 60000 60000 300000

23FINANCIAL AND MANAGEMENT ACCOUNTING
Cash Inflow:
Selling Price per
unit £70 £70 £70 £70 £70
Total Sales
Revenue
£42,00,
000
£42,00,
000
£42,00,
000
£42,00,
000
£42,00,
000
£210,00,
000
Other Cash
Inflows £0 £0 £0 £0 £0 £0 £0
Total Cash Inflow £0
£42,00,
000
£42,00,
000
£42,00,
000
£42,00,
000
£42,00,
000
£210,00,
000
Cash Outflow:
Initial Investment
-
£40,00,
000
-
£40,00,0
00
Direct Material
-
£4,80,0
00
-
£4,80,0
00
-
£4,80,0
00
-
£4,80,0
00
-
£4,80,0
00
-
£24,00,0
00
Direct Labour
-
£4,20,0
00
-
£4,20,0
00
-
£4,20,0
00
-
£4,20,0
00
-
£4,20,0
00
-
£21,00,0
00
Fixed Overhead
Apportioned
-
£3,00,0
00
-
£3,00,0
00
-
£3,00,0
00
-
£3,00,0
00
-
£3,00,0
00
-
£15,00,0
00
Variable Overhead
-
£1,80,0
00
-
£1,80,0
00
-
£1,80,0
00
-
£1,80,0
00
-
£1,80,0
00
-
£9,00,00
0
Total Cash
Outflow
-
£40,00,
000
-
£13,80,
000
-
£13,80,
000
-
£13,80,
000
-
£13,80,
000
-
£13,80,
000
-
£109,00,
000
Appendix D:
NPV, IRR and Payback Period:
Period
Particulars 0 1 2 3 4 5
Initial Investment
-
£40,00,0
00
Sales Revenue £0 £42,00,0 £42,00, £42,00, £42,00, £42,00,0

24FINANCIAL AND MANAGEMENT ACCOUNTING
00 000 000 000 00
Direct Material £0
-
£4,80,00
0
-
£4,80,0
00
-
£4,80,0
00
-
£4,80,0
00
-
£4,80,00
0
Direct Labor £0
-
£4,20,00
0
-
£4,20,0
00
-
£4,20,0
00
-
£4,20,0
00
-
£4,20,00
0
Fixed Overhead
Apportioned £0
-
£3,00,00
0
-
£3,00,0
00
-
£3,00,0
00
-
£3,00,0
00
-
£3,00,00
0
Variable Overhead £0
-
£1,80,00
0
-
£1,80,0
00
-
£1,80,0
00
-
£1,80,0
00
-
£1,80,00
0
Net Cash Flow from
Operations £0
£28,20,0
00
£28,20,
000
£28,20,
000
£28,20,
000
£28,20,0
00
Salvage Value £0
Net Cash Flow
-
£40,00,0
00
£28,20,0
00
£28,20,
000
£28,20,
000
£28,20,
000
£28,20,0
00
Cumulative Cash Flow
-
£40,00,0
00
-
£11,80,0
00
£16,40,
000
£44,60,
000
£72,80,
000
£101,00,
000
Cost of Capital 12% 12% 12% 12% 12% 12%
Discounted Cash Flow
-
£40,00,0
00
£25,17,8
57
£22,48,
087
£20,07,
220
£17,92,
161
£16,00,1
44
Payback period (in
years) 1.42
Net Present Value
£61,65,4
69
Internal Rate of Return 65%