Reference no: EM132474971
Assessment 1:
Problem 1 - Refer to the 2013 Woolworths financial statements in Appendix 1.
1. What were the two major liabilities as at 30 June 2013?
2. Calculate the following ratios for Woolworths (consolidated accounts):
1. Current Ratio
2. Quick Ratio
3. Gross Profit Margin
4. Debt to Equity
Problem 2 - As an analyst, you have extracted the following information from the accounts of Romeo Construction Co. Ltd.
Romeo Construction Co. Ltd
Statement of Comprehensive income for the years ended 30 June.
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20X4
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20X5
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20X6
|
|
Sales
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$60,000
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$54,000
|
$75,000
|
|
Less Expenses
|
|
|
|
|
Material
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$22,500
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$21,000
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$35,813
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|
Labour
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$15,000
|
$13,500
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$18,000
|
|
Production Expenses
|
$7,500
|
$6,000
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$6,750
|
|
Administrative Expenses
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$7,500
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$7,500
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$8,250
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|
Finance Expenses
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$500
|
$1,500
|
$1,500
|
|
Profit for the year
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$6,000
|
$4,500
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$4,687
|
|
Other Comprehensive Income
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$0
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$0
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$0
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Total Comprehensive Income
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$6,000
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$4,500
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$4,687
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Balance Sheet as at 30 June.
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20X4
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20X5
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20X6
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|
Work in progress
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$60,000
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$52,500
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$67,500
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|
Non-current assets
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$30,000
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$37,500
|
$37,500
|
|
$90,000
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$90,000
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$105,000
|
|
Bank Overdraft
|
$15,000
|
$18,000
|
$12,000
|
|
Other current liabilities
|
$15,000
|
$12,000
|
$18,000
|
|
Shareholder funds
|
$60,000
|
$60,000
|
$75,000
|
|
$90,000
|
$90,000
|
$105,000
|
Other information
All profits have been distributed as dividends each year.
The company issued $15,000 of shares in 20X6.
Required
Part 1. Commence on the profitability of the business.
Part 2. Comment on the financial situation of the business.
Part 3. What action do you suggest for the coming year?
Problem 3 - The balance sheets and selected information given below for Katrina Ltd and Catherine Ltd for the year ended 30 June 20X2.
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KATRINA $
|
KATRINA $
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CATHERINE $
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CATHERINE $
|
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Assets
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash at bank
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80,000
|
|
220,000
|
|
|
Marketable securities
|
8,000
|
|
190,000
|
|
|
Accounts receivable (net)
|
100,000
|
|
130,000
|
|
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Merchandise inventory
|
560,000
|
|
300,000
|
|
|
Total current asset
|
|
748,000
|
|
840,000
|
|
Non-current assets
|
|
|
|
|
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Property, plant & equipment
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1,200,000
|
|
1,280,000
|
|
|
Intangibles
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6,000
|
|
0
|
|
|
Total non-current asset
|
|
1,206,000
|
|
1,280,000
|
|
Total assets
|
|
1,954,000
|
|
2,120,000
|
|
|
|
|
|
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Liabilities and shareholders' equity
|
|
|
|
|
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Current Liabilities
|
|
180,000
|
|
310,000
|
|
Non-Current liabilities
|
|
340,000
|
|
330,000
|
|
Paid-up capital ($10 value)
|
|
1,300,000
|
|
1,300,000
|
|
Retained profits
|
|
134,000
|
|
180,000
|
|
Total liabilities and shareholders' equity
|
|
1,954,000
|
|
2,120,000
|
|
Other information
|
|
|
|
|
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Accounts receivable 1.7.X1
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130,000
|
|
110,000
|
|
|
Merchandise inventory 1.7.X1
|
520,000
|
|
420,000
|
|
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X1 - X2 Sales
|
|
|
|
|
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Cash
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852,000
|
|
400,000
|
|
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Credit
|
1,100,000
|
|
1,500,.000
|
|
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X1 - X2 Cost of goods sold
|
1,200,000
|
|
1,100,000
|
|
|
X1 - X2 Net profit
|
310,000
|
|
400,000
|
|
|
X1 - X2 Interest expense
|
60,000
|
|
40,000
|
|
|
Total shareholder's equity 1.7.X1
|
1,334,000
|
|
1,380,000
|
|
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Total assets, 1.7.X1
|
1,854,000
|
|
2,020,000
|
|
|
Tax rate: 30%
|
|
|
|
|
Required:
Part 1. Calculate the current ratio, quick ratio, inventory turnover, accounts receivable turnover and average days sales uncollected for each company.
Part 2. Which company do you think as a better liquid position? Why?
Part 3. Calculate, for each company, the rate of return on total assets (ROA), asset turnover and net profit margin before after - tax cost of interest. Which company has the higher ROA? Why?
Part 4. Calculate, for each company, the rate of return on ordinary shareholders' equity (ROA), asset turnover and net profit margin and financial leverage ratios. Which company has the higher ROE? Why?
Part 5. Which company is using leverage more effectively to increase the rate of return to ordinary shareholders? Explain.
Progress your "Manual Accounting Practice Set" by Perdisco with your teacher.
Assessment 2:
Problem 1 - What points need to be considered before preparing a budget?
Problem 2 - Some companies, such as Volvo, no longer prepare budgets. What are the main advantages and disadvantages of using a budget?
Problem 11 - The financial controller of BBQ Essentials requests estimates sales, production and other operating data from the various administrative units every month.
Selection information concerning sales and production for May is summarised as follows:
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Sales Territory
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Estimated Sales for May
Basic Backyard Model per Unit
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Estimated Sales for May
Deluxe Master Model per Unit
|
|
Sydney
|
3,500 units @ $550
|
|
1,800 units @
|
$1,300
|
|
Hobart
|
2,800 units @ $500
|
|
1,500 units @
|
$1,200
|
|
Perth
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4,000 units @ $600
|
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2,900 units @
|
$1,500
|
|
Direct Materials: Estimated Inventories Desired Inventories Anticipated
|
|
@ 1 May at 31 May Purchase Price
|
|
Grates
|
1,000 units
|
800 units
|
$15 per unit
|
|
Stainless Steel
|
2,500 kg
|
1,900 kg
|
$3 per kg
|
|
Burner Sub Assemblies
|
6,00 units
|
800 units
|
$72 per unit
|
|
Selves
|
400 units
|
480 units
|
$7 per unit
|
|
Finished Products Estimated Inventories Desired Inventories
@ 1 May at 31 May
|
|
Basic model
|
1,500 units
|
1,200 units
|
|
Deluxe model
|
400 units
|
500 units
|
|
Direct materials used in production |
Direct materials used in production |
|
Basic Model per Unit of Product |
Deluxe Model per Unit of Product |
| Grates |
2 units |
6 units |
| Stainless steel |
25 kg |
65 kg |
| Burner sub assemblies |
1 unit |
4 units |
| Shelves |
2 units |
3 units |
| Department |
Direct Labour Requirements Basic Model per Hour |
Direct Labour Requirements Deluxe Model per Hour |
| Prefabrication |
0.50 hours @ $12 |
0.60 hours @ $12 |
| Forming |
0.75 hours @ $10 |
1.50 hours @ $10 |
| Assembly |
1.50 hours @ $9 |
2.50 hours @ $9 |
Required
Part 1. Prepare a sales budget for May.
Part 2. Prepare a production budget for May.
Part 3. Prepare a direct materials purchases budget for May.
Part 4. Prepare a direct labour cost budget for May
Assessment 3:
Problem 1 - Visit the Woolworths Limited website and download the company's most recent annual report. Locate within the Director's Statutory Report the report of the Remuneration Committee which provides comprehensive disclosures about the remuneration paid to key management personnel (KMP).
Q1. What is Woolworths' remuneration strategy and what are the goals the strategy is designed to achieve?
Q2. What are the principles embodied in Woolworths' remuneration framework?
Q3. How will Woolworths apply these remuneration principles in terms of the use of external data, the setting of targets and the awarding of incentives to KMP?
Q4. What is the structure of the remuneration package offered to KMP?
Q5. Focusing on the at-risk short-and long-term rewards offered by Woolworths to KMP, identify, review and comment on the components of the incentives, the weightings allocated to each component and the performance measures (or hurdles) used to determine whether an incentive will be awarded.
Q6. Review the performance measures Woolworths uses for the awarding of short-term annual cash incentive for the KMP identified in the Remuneration Report.
1. What are those financial and non-financial measures?
2. How would you assess the balance between financial and non-financial measures?
3. Why would the financial and non-financial measures for individual KMP be different in terms of applicability and weighting?
Problem 2 - Indicate, for each of the following independent casers, whether they are best structured as cost, profit or investment centres:
Q1. Kellee is head of the marketing and public relations department at Satellite University. The department receives funding from the central administration for teaching and research. The department is allocated funds based on projected expenditures. Kellee is responsible for 10 academic staff and 2 general staff.
Q2. Leigh is head of the school of business located on the campus at Planet University. The school enrols only full-fee-paying students and is responsible for all operating costs and a share of the university's overheads. The university provides a building and teaching venues. Leigh is responsible for 30 academic staff and 10 general staff.
Q3. Troy is head of the division of business at Universe University. The division is located in its own building in the city as part of a strategic move by the university. The division enrols only full-fee-paying students and it also conducts short courses for businesses in the CBD. The division is responsible for all capital and operating costs.
Problem 3 - You are a director of a credit union and you have been appointed to the remuneration subcommittee. One of your first tasks is to consider a bonus for the general manager. You believe that a bonus should be paid based on performance. The credit union has 10,000 members and total assets of $50 million, with $40 million in loans to members. It operates four branch locations and a head office and employs a total of 30 people. You are familiar with using KPIs such as return on assets as a measure of performance. However, the board of directors has a policy of not aiming to maximise profit as the credit union exists for the benefit of its members. Therefore, you consider it to be inappropriate to use return on assets as a measure of the performance of the general manager.
Required
What other financial and non-financial measures of performance could be used to assess the performance of the general manager?
Problem 6 - List three performance measures that would be appropriate for the following centres:
Q1. An academic department in a university established as a cost centre.
Q2. A branch of a bank established as profit centre.
Q3. A division of a large steel company established as an investment centre.