Reference no: EM13862487

Adrian Lee is a recent AMME graduate. A few years ago he launched his new incorporated business, “Meter Marshall”. Adrian is a keen inventor and entrepreneur. He developed a novel current detection & monitoring device as part of his undergraduate thesis project. He soon realised that his thesis work had commercial potential and encouraged by a potential wholesaler, so he “fine-tuned” his invention. He then further enhanced the device and then established a distribution agreement to sell the devices through accredited national electrical wholesalers. The “approved” device can be attached downstream of the electricity meter to monitor, log and record power usage. Data recorded (and then formatted) from the device can be stored and downloaded via a USB connection. His customer base is growing constantly and they often use the data collected to monitor their individual energy usage. Many of them buy the unit solely to reference consumption against “energy billing accounts” issued by the energy provider. From both user perspectives, he has satisfied customers and demand is growing strongly. After the second full trading year, Meter Marshall (MM) is again doing nicely and Adrian now needs to consult outside parties to seek additional funding to grow his small and dynamic business. He has spent most of his time on the technical development of the business. Adrian expects that his potential funding managers will drill him on financial aspects of the business at this meeting. Below is the condensed information on MM for the financial year period: 1 July 2014 to 30th June 2015. The following account balances are accurate as at 30th June 2015

Item (account balance)   $

Salaries 127,000

Rent for workshop premises 36,000

Cost of goods sold 500,000

Sales 772,000

Sales returns 10,000

Power consumption for workshop 6,000

Cash on hand 22,000

Marketable securities (fixed deposit) 20,000

Intangibles - Registered trademarks (IP) 16,000

Trade debtors 74,000

Packaging and handling expenses 1,000

Trade creditors 5,000

Provision for dividends payable 4,000

Inventory on hand (stock) 182,000

Long term loan (Westpac Bank) 40,000

Loans to company directors 33,000

Plant 89,000

Group Tax payable (Provision) 20,000

Issued and paid up capital 155,000

Share premium reserve 18,000

Retained earnings 45,000

Provision for depreciation: Plant (one off) 57,000

Question 1: From the list of account balances above separate those items that are revenue and expense items. Match these together and calculate the profit

Question 2: List the remaining items into asset, liability and equity categories. Add the profit as calculated in question 1, to equity and complete the accounting equation

Question 3: Assuming that long-term loans are the only “external debt” arrangement, what is the gearing ratio for Meter Marshall at balance date?

Question 4: What is the return on Shareholders’ Funds (equity) for Meter Marshall during the 12-month period, assuming a taxation rate of 39%? Question 5: What is the stock turn ratio for the accounting period, at balance date?