Financial and Business Performance Running Head: Financial and Business Performance Information

Running Head: Provide financial
and
business performance information
Financial
and
Business
Performance
Information

Financial and Business Performance
Contents
PART -A.................................................................................................................. 2
1. Introduction........................................................................................................ 2
2. Financial Statements of Lynch Quality Goods..............................................................2
A. INCOME STATEMENTS................................................................................... 2
B. BALANCE SHEETS.......................................................................................... 4
3. Calculation of Ratios: Lynch Quality Goods................................................................7
3.1 Liquidity Ratios................................................................................................ 13
3.2 Activity Ratios................................................................................................. 14
3.3 Profitability Ratios........................................................................................ 15
3.4 Leverage Ratios................................................................................................ 16
4. Other Recommendations....................................................................................... 16
5. Conclusion........................................................................................................ 17
Appendix................................................................................................................ 17
PART –A (Question 3)............................................................................................... 17
Requirements of Lynch Quality Goods........................................................................18
Questions Related to the Information Provided..............................................................18
PART –B................................................................................................................ 19
Answer 1................................................................................................................ 19
Answer2................................................................................................................. 21
Answer3................................................................................................................. 22
Answer4................................................................................................................. 23
References.............................................................................................................. 25
1

Financial and Business Performance
PART -A
1. Introduction
The Lynch Quality goods started its business three years back and the business was
successful. In 2017/18, it witnessed a drop in its sales figure but the equity of the company
had improved. Now, the company is planning to buy long term interest in another company
using long term loan of $100,000 and wanted to know the impact of this investment on the
ratios. With the given information, we would calculate the ratios of 2017 and 2018 and also
analyse the results to know whether the impact of the investment on the ratios would be
positive or negative.
2. Financial Statements of Lynch Quality Goods
A. INCOME STATEMENTS
Income Statement
(2016/17) $ $ $
Revenue 7,20,000
Less COGS
Opening Stock 25,000
Purchases 3,10,000
Less Closing Stock 28,000 3,07,000
Gross Profit 413000
Less Operating
Expenses
Selling Expenses
Sales salaries 92,000
Sales commissions 16,500
Advertising 3,000 1,11,500
Admin Expenses
Cleaning 14,300
Depreciation vehicle 8,000
Depreciation 28,000
2

Financial and Business Performance
equipment
General admin
expenses 6,800 57,100
Financial Expenses
Bank fees 400
Interest 20,000 20,400 1,89,000
Net Profit 2,24,000
Tax Payable 67,200
Net Profit After Tax 1,56,800
2017/2018 Income Statement
$ $ $
Revenue 6,10,000
Less COGS
Opening Stock 28,000
Purchases 2,48,000
Less Closing Stock 35,000 2,41,000
Gross Profit 3,69,000
Less Operating
Expenses
Selling Expenses
Sales salaries 95,000
Sales commissions 12,000
Advertising 4,800 1,11,800
Admin Expenses
Cleaning 15,200
Depreciation vehicle 8,000
Depreciation equipment 28,000
General admin expenses 7,500 58,700
Financial Expenses
Bank fees 500
Interest 18,000 18,500 1,89,000
Net Profit 1,80,000
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Financial and Business Performance
Tax Payable 54,000
Net Profit After Tax 1,26,000
B. BALANCE SHEETS
2016/17 Balance Sheet
Current Assets $ $ $
Cash
1,32,00
0
Accounts Receivable 65,000
Inventory 28,000
2,25,00
0
Non-Current Assets
Building
4,00,00
0
Equipment
2,80,00
0
Accumulated
Depreciation
1,12,00
0
1,68,00
0
Vehicle 64,000
Accumulated
Depreciation 16,000 48,000
6,16,00
0
Total Assets
8,41,00
0
Current Liabilities
Accounts Payable 32,000
GST Payable 9,600
Tax Payable 67,200
1,08,80
0
Non-Current
Liabilities
Mortgage
2,00,00
0
Loan 50,000
2,50,00
0
Total Liabilities
3,58,80
0
Net Assets
4,82,20
0
Capital
Opening Capital
4,45,40
0
Net Profit After Tax
1,56,80
0
Less Drawings
1,20,00
0
4,82,20
0
4

Financial and Business Performance
2017/2018 Balance Sheet
Current Assets $ $ $
Cash
1,12,60
0
Accounts Receivable 62,000
Inventory 35,000
2,09,60
0
Non-Current Assets
Building
4,00,00
0
Equipment
2,80,00
0
Accumulated
Depreciation
1,40,00
0
1,40,00
0
Vehicle 64,000
Accumulated
Depreciation 24,000 40,000
5,80,00
0
Total Assets
7,89,60
0
Current Liabilities
Accounts Payable 24,000
GST Payable 8,400
Tax Payable 54,000 86,400
Non-Current
Liabilities
Mortgage
1,80,00
0
Loan 45,000
2,25,00
0
Total Liabilities
3,11,40
0
Net Assets
4,78,20
0
Capital
Opening Capital
4,82,20
0
Net Profit After Tax
1,26,00
0
Less Drawings
1,30,00
0
4,78,20
0
5