Reference no: EM133164624

Question: Casey Ltd buys and sells low-price jewellery in a chain of small retail outlets in the midlands and the north of the UK.

The company had grown steadily in the 5 years up to 31 March 2017, but the Directors decided at that time that a complete enhancement of the company's brand and improved marketing was needed to allow the company to continue to grow and venture further south.

In the year ended 31 March 2018, a total of £45million was spent on the development of a new company logo, including a complete re branding of all stores, and a further £25million on the marketing of a new range of higher-quality jewellery, which was available to customers from 1 October 2017. The directors consider that this expenditure will bring benefits to the company for at least five years.

Finance for this development (and the continued growth of the company) came mainly from loan capital. There was also a small issue of shares at market value on 1st April 2017.

At 31st March 2017 the market value of each ordinary share was £1.50 per share. The share price stayed at this level for the rest of the financial year, but on the release of the 2018 accounts the market value of each ordinary share fell to £1.25 per share, despite the company reporting higher profit figures.

The financial statements for 2018 and 2017 are summarised below:

Statement of Comprehensive Income for the year ended 31 March

		2018			2017
		£m			£m
Sales Revenue		1,142			857
Cost of Sales		297			238
Gross Profit		845			619
Otherincome		3			2
		848			621
Operating Expenses		580			390
Profit before interest and tax		268			231
Interest payable		45			31
Profit before tax		223			200
Taxation		67			60
Profit after tax		156			140

Statement of Financial Position at 31 March

		2018			2017
	£m	£m		£m	£m
Non-current assets
Property plant and equipment		1,023			776
Investments		30			20
Current assets
Inventories	114			80
Trade receivables	105			71
Cash at bank and in hand	1			14
		220			165
Total assets		1,273			961
Equity
Ordinary share capital        (50 p shares)		255			240
Share premium account		119			108
Retained Earnings		182			151
		556			499
Non-current liabilities
Long-term loans		520			330
Current liabilities
Bank overdraft	16			0
Trade payables	64			31
Interest payable	10			6
Taxation payable	67			60
Long-term loans	40			35
		197			132
Total equity and liabilities		1,273			961

 

Required:

(a) Identify and calculate 10 key accounting ratios that best illustrate the financial performance and financial position of Casey Ltd for the years ended 31st March 2018 and 31 March 2017.

(b) Evaluate the change in financial performance and position of the company between these two years.