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Performance evaluation and investment decision making for M plc

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Added on  2023-06-08

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This article discusses the performance evaluation of M plc based on ratios such as gross profit ratio, net profit ratio, liquidity ratio, efficiency ratio, and more. It also covers investment decision making using payback period and NPV. The recommended project is suggested based on the ranking table. Other factors to be considered while taking the investment decision are also discussed.

Performance evaluation and investment decision making for M plc

   Added on 2023-06-08

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SECTION A
Question 1
Income statement
Particulars Details Amount
Sales 977
Less
Cost of Sales
Opening inventory 40
Purchases 510
Closing inventory 60 490
Gross profit 487
Expenses
Business Rates and insurance (60- 7) 53
General expenses 22
Audit fees (13+ 2) 15
bad debt 1
directors remuneration 52
debenture interest 15
heating and lighting (25+1) 26
salaries and wages 150
depreciation on machinery 25
depreciation on fitting 12 371
Profit before tax 116
provision for tax 20
Profit after tax 96
interim dividend paid (21) 21
final proposed (350 * 0.8) 28 49
retained profit from last year 50
retained profit for this year 97
Notes
depreciation
Machinery
cost - accumulated 150- 50 100
depreciation 100 * 25% 25
Performance evaluation and investment decision making for M plc_1
Fitting
cost - accumulated 100- 40 60
depreciation 60 * 20% 12
Statement of financial position
Particular Details amount
Non- current asset
Land and building 500
Machinery 150
Fitting 100
Accumulated depreciation 127 623
current asset
receivable 80
cash 3
bank 12
Closing inventory 60
prepayments 7 162
Total assets 785
Non- current liabilities
10 % debenture 200
200
current liabilities
payable 67
accrued 3
proposed dividend 28
interim dividend paid 21 119
Share capital
£1 Ordinary share capital 350
profits 96 466
Share premium 20
Total shareholder fund 785
Performance evaluation and investment decision making for M plc_2
SECTION B
Calculating the ratios for RT plc
Particular Formula RT plc (2020) 2019
Gross profit ratio Gross profit/ sales * 100 33.33 33.28
Gross profit 600
Sales 1800
Particular Formula RT plc (2020) 2019
Net profit ratio Net profit/ sales * 100 11.11 9.5
Net profit 200
Sales 1800
Particular Formula RT plc (2020) 2019
Current ratio Current asset/ current liabilities 2.75 2.1:1
Current asset 550
Current liabilities 200
Particular Formula
RT plc
(2020)
2019
Quick ratio
(current asset - inventory) / current
liabilities 1.50
1.25: 1
Current asset 550
Inventory 250
Current
liabilities 200
Particular Formula
RT plc
(2020)
2019
Account
receivable
Average account receivable/ total sales *
365 57
45
Account
receivable 280
Performance evaluation and investment decision making for M plc_3

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