Financial Analysis and Performance Report for Compsoft Limited

This report presents a comprehensive financial analysis of Compsoft Limited, a computer service company. The first part of the report calculates the value added by the company, which amounted to £43,000, and details how the company utilized its income, including expenses such as spare parts, salaries, rent, and leasing fees. It further provides advice on utilizing surplus cash, suggesting options like paying down debts or investing, considering factors such as interest rates and investment opportunities. The second part of the report delves into cost and revenue analysis, calculating percentages for various costs and analyzing the break-even point for petrol sales, including a table showing costs, sales revenue, and profits or losses. It includes a break-even graph, calculations for profit/loss at different sales volumes, and the margin of safety. The report concludes with a list of references.

Task 4 Report

Table of Contents
Report 1...........................................................................................................................................3
How much-added value the company has achieved during the year?.........................................3
How has the money received as income been used by the business?..........................................4
How would you advise the directors of Compsoft to utilize any surplus money?......................5
Calculate the percentage of:.........................................................................................................6
Report 2...........................................................................................................................................7
References......................................................................................................................................10

Report 1
How much-added value the company has achieved during the year?
The value-added structure reveals the performance indicator as it allows to assess the
effectiveness of the company for the given activity (taking into consideration the resources put
into practice) and on the other side, an indicator of economic integration if we consider the
external material into and consumption of energy. The added value has now become a true
measurement of the tool for evaluating the company's performance. This added value has been
approached to varied fields within the business management. In the case of Compsoft Limited,
we have followed a procedure to calculate the added value in computer service. This added value
is close to economic value added concept but still, it is different based on the figures available.
Compsoft Limited has heavily invested in many particulars for improving the performance. The
indicators used for achieving this goal is the value-added methodology. As per the calculation,
the company has been successful in adding 43000 as additional value added during the year.
The value is the difference in between the output values and the input values of the company
after going through operations and processes. Below is the calculation of the additional value
added by the company (Căruntu & Lăpăduşi, 2012):
Costs £
Spare parts or repairs 25,000
Software and computer supplies bought for resale 72,000
Wages and salaries 42,000
Rent and rates of premises 11,000
Finance costs: Interest paid on bank loan 3,000
Leasing of office equipment 12,000

Income £
Receipts from repairs 100,000
Sales of software and computer supplies 108,000
Value-added 43,000
How has the money received as income been used by the business?
Compsoft Limited is a computer service company which has recently started its operation. The
company extensively offer computer repair services to local business. The company has
successfully earned 208000 in the first year as income from the business. This income earned by
the company has been used in many ways. Below are some of the ways the company has utilized
its income:
 Purchasing spare arts for repairing
 Payment of salaries
 Payment of the rent of the office premise
 Payment of interest paid to the bank
 Payment of leasing fee of office equipment
 Payment of software parts ought for resale
The management of the company has used the income from the business in paying all the above-
mentioned expenses so as to run the business effectively. The figures reveal that the company
even after using the income in paying the above-mentioned expenses has been able to reserve
some surplus amount of 43000 in the first year

How would you advise the directors of Compsoft to utilize any surplus money?
As the company has been able to earn surplus cash so considering this, the company will be
having two options of using the surplus cash (Bizfilings, 2018; Edwardlowe, 2018):
 Paying down the debts
 Investing the surplus cash
Paying down the debts: It can be the first option to be considered by the company. This is
mainly because the short term investments of the surplus available cash in the company is not
going to yield equal amount of return or greater than the interest rate which organization is
actually paying on any types of debts. It actually does not make any sense in investing the
surplus amount of cash at the arte of 5 percent when the organization is paying the interest on
bank loans of approximately 12 percent. One of the main benefit of the maintenance of the flow
of cash is the capability of predicting the expected future needs of the cash level for the business.
This means it should basically helps in analyzing when the business may require to rely on the
external sources of the financing as a surplus cash (Nixonwilliams, 2018).
Investing the Surplus amount of cash: While investing the surplus amount of cash, it is quite
natural to determine the highest rate of return of the investments
Four main factors that need to be considered in this case are risk, liquidity, maturity, and yields.
Every factor plays an important part in analyzing the rate of returns that company receives on the
invested cash surpluses. The factors can help in determining how much amount company should
invest and when they should invest the surplus level amount. There are many opportunities
available for the surplus cash management of the organization. Some of the opportunities of
investment available in the market are:

Checking the accounts with interest: Interest-bearing checking accounts are the simple method of
investing the cash surplus
Sweep accounts: it is a combination of a regular checking account and money market account
Treasury bills – These are direct obligations of federal government issued at discount rate. It is a
popular investment for short-term
Calculate the percentage of:
The costs of spare parts
Costs £
Spare parts or repairs 25,000
Software and computer supplies bought for resale 72,000
Wages and salaries 42,000
Rent and rates of premises 11,000
Finance costs: Interest paid on bank loan 3,000
Leasing of office equipment 12,000
Total Cost 165,000
Income
Receipts from repairs 100000
Sales of software and computer supplies 108,000
- Percentage of cost of spare parts (25000/100000)*100 = 25%
- The cost of software and computer supplies
(72000/108000)*100 = 66.67%
- Reasons for differences in the percentages: There are no much differences in the revenues
generated from sales of software & computer supplies and sales from repairs. But the cost

associated with the software and computer supplies are much higher than the cost of
spare parts repairs. It is almost three times higher than the cost of spare parts repairs. This
may be because the software's and computer supplies are generally much expensive in
such cases. This increases the percentage of the cost of software and computer supplies
against its revenue.
Report 2
Given:
Unit increment (For X axis) = 1000
Fixed Cost = 750
Selling price per unit = 65p
Variable Cost per unit = 60p (Tsorakidis, 2008; Cafferky, 2010)
a. Prepare a table showing costs, sales revenue, and profits or loss for sale of petrol in
multiples of 1,000 litres up to 20,000 litres
Unit FC V C TC Sales Profit/Loss
0
75
0 0 750 0 -750
1000
75
0 600 1350 650 -700
2000
75
0 1200 1950 1300 -650
3000
75
0 1800 2550 1950 -600
4000 75 2400 3150 2600 -550

0
5000
75
0 3000 3750 3250 -500
6000
75
0 3600 4350 3900 -450
7000
75
0 4200 4950 4550 -400
8000
75
0 4800 5550 5200 -350
9000
75
0 5400 6150 5850 -300
10000
75
0 6000 6750 6500 -250
11000
75
0 6600 7350 7150 -200
12000
75
0 7200 7950 7800 -150
13000
75
0 7800 8550 8450 -100
14000
75
0 8400 9150 9100 -50
15000
75
0 9000 9750 9750 0

16000
75
0 9600 10350 10400 50
17000
75
0 10200 10950 11050 100
18000
75
0 10800 11550 11700 150
19000
75
0 11400 12150 12350 200
20000
75
0 12000 12750 13000 250
b. Draw a graph showing the break-even point
Unit 0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
20000
0
2000
4000
6000
8000
10000
12000
14000
Break Even
TC
Sales
Axis Title
Break Even unit 15000
Break Even 9750
Figure 1: Break Even
c. Prove your answer by calculation
Fixed Cost = 750
Selling price per unit = 65p

Variable Cost per unit = 60p
Break Even Point = (Fixed Cost/ (Selling Price – Variable cost per unit)
= (750/ (0.65- 0.60))
= 15000
Break Even = (15000 * 0.65) = 9750 (Vijayakumar, 2008; Tucker, 2009)
d. Read off the graph the profit or loss if 12,000 liters and 18,000 liters are sold each
week: Prove the answer by calculation
Particulars 12000 units 18000 units
Sales 7800 11700
Variable Cost 7200 10800
Contribution Margin (S- V
C ) 600 900
Fixed Expenses 750 750
Profit (CM – FC ) -150 150
e. If sales are currently 18,000 liters each week, what is the margin of safety, expressed in
liters and as a percentage?
Break Even Sales Calculation
Fixed Cost = 750
Sales Price = 18000*0.65 = 11700
Variable Expenses = 18000 *0.60 = 10800