Reference no: EM132273923 , Length: word count:1500

SECTION A: CALCULATIONS OF RATIOS AND PERCENTAGES

ACTION BOARDS LIMITED

BACKGROUND

Action Boards Limited is a small Papakura based company set up by two friends, Kane and Isobelon 1 April 2013. They started the business with an initial capital investment of $35,000 each, consisting of 35,000 $1 shares each fully paid. The main items they sell areskateboards and hoverboards, as well as associated accessories. They have one store only in Papakura. Their retail sales are both on credit and for cash.

Kane and Isobel had noticed thatthere has been an improvement in the local economy and the turnover for the company has increased in the past financial year, particularly as a result of the introduction of hoverboards as an item of inventory.However currently Action Boards Limitedis having difficulty paying the business accounts on time. They wonder whether this is because their credit customers are not paying their accounts promptly. Credit customers are expected to pay by the 20th of the month following sale.

During 2016 and 2017 Action Boards Limited had only one employee but in the year ending 31 March 2018, Kane and Isobel decided to employ an additional staff member because of the introduction of a new item of inventory - hoverboards. Kane and Isobel work in the shop as well as carry out any administration work involved with the company. Both Kane and Isobelreceive a salary, along with a dividend payment from the profits at the end of the year.

As an Accountant at BSJ Accountants Limited you have been hired by Kane and Isobel to analyse Action Boards Limited's last three (3) years' financial statements which are shown on pages 5 - 7. They would like you to calculate the profitability, asset utilisation and financial stability statistics for the firm. Please use the formulae which are listed on page 3 and 4 of this document.

As part of your analysis of the company you need to identify an area of success for the business and an area that is causing a problem for the business and suggest a suitable solution to solve the problem area.

YOU ARE REQUIRED TO:

Part A: CALCULATIONS OF RATIOS AND PERCENTAGES

Complete the Schedule of Statistics in the answer booklet. Use the Financial Statements supplied, to prepare and type up the Schedule of Statistics for Action Boards Limited for each of the years 2016, 2017 and 2018.

• Typethe answers to the ratios and percentages calculations only into the Schedule of Statistics.

• Show all percentages, ratios etcrounded to 2 decimal places only.

• Make sure you label your results carefully, e.g. % , : , days or times.

• Show your workings. These may be handwritten or typed and should be attached at the end of your answer booklet.

PART B: FINDINGS AND CONCLUSIONS

The answers to Part B should be typedin the appropriate place in the answer booklet.

(i) Profitability

For each of the three (3) Profitability calculationsof Action Boards Limitedstated in your answer booklet, you are required to report to the owners on the following:

• Explain what the calculationis designed to show.
• Using the figures calculated, explainwhether the trend for the business is satisfactory or not for this business (show the figures calculated). Give brief reason(s) to support your answer.
• Suggest possible reasons why the calculation has changed.

(ii) Asset Utilisation

Using both of the Asset Utilisation calculations, complete the following for Action Boards Limited, you are required to report to the owners on the following:

• Explain what the calculationis designed to show.
• Using the figures calculated, explain whether the trend for the business is satisfactory or not for this business. Give brief reason(s) to support your answer.
• Suggest possible reasons why the calculation has changed.

(iii) Financial Stability

For each of the three (3) financial stability calculationsof Action Boards Limited stated in your answer booklet, you are required to report to the owners on the following:

• Explain what the calculation is designed to show.
• Using the figures calculated, explain whether the trend for the business is satisfactory or not for this business. Give brief reason(s) to support your answer.
• Suggest possible reasons why the calculation has changed.

PART C: STRENGTHS, PROBLEMS AND RECOMMENDATIONS

The answers to Part C should be typed into the appropriate place in the answer booklet.

Use the analysis in Part B of your answers and IDENTIFY:

• one area where the business is successful and doing well; why you consider this is a success area for the business and the importance for the business of this area.

• one problem area for the business - provide recommendations to Kane and Isobelon how to improve in the area that you have identified.

Attachment:- Assignment_on_Analysis.rar