Financial Analysis of Melmotte Ltd

MELMOTTE LTD

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
Question 1........................................................................................................................................1
a) Descriptions.............................................................................................................................1
b) Purpose of financial statements...............................................................................................1
c) Treatment for product going out of fashion.............................................................................1
Question 2........................................................................................................................................1
a) Revenue ..................................................................................................................................2
b) Gross Profit .............................................................................................................................2
c) Other SPL Costs ......................................................................................................................3
d) Operating Profit ......................................................................................................................4
Question 3........................................................................................................................................5
a) Non Current Assets .................................................................................................................5
b) Grosvenor proposed investment. ............................................................................................6
Question 4........................................................................................................................................6
a) Reasons for negative cash balance...........................................................................................6
b) Outflows from cash statements................................................................................................6
REFERENCES................................................................................................................................7

EXECUTIVE SUMMARY
The present report is about the financial analysis of company. The report will reflect the
health and position of company. Various ratios will be used in assessing the financial statements.
Performance of company from previous year has been analysed for Grosvenor to check the
investments viability. Report has given understanding about various accounting concepts and
treatments.
2.2 QUESTIONS
Question 1
a) Descriptions
I) The above description relates to statement of Profit or Loss. Second statement of
description relates to statement of financial position.
II) Transaction for securing the long term debt would be allocated in balance sheet where the
expense related to the hiring of administrator will be charged to the profit or loss.
b) Purpose of financial statements.
SOFP – The above statements represents the financial health of the organisation. Example
customer ; for knowing whether company would be able to continue its supplies.
SPL – This is prepared for knowing the profitability from running a business. User Investors ;
they seek whether company is able to provide adequate returns overt their investments.
SCF – The statements is prepared for knowing the cash inflow and outflow during the year.
Suppliers seek to know whether company has the liquidity to repay the purchases (Williams and
Dobelman, 2017).
c) Treatment for product going out of fashion.
I) As per IAS 2 inventories should be recognised at cost or net realizable value whichever is
lower.
II) This complies with the recognition criteria as company recognises carrying cost of
inventories when they are sold.
III) The effect of writing off could be charged directly to cost of goods sold in the profit or
loss statement or the inventory may be offset from inventory account in balance sheet
(Platonova and et.al., 2018.).
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