Reference no: EM13854924
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
1. From the list of account balances above separate those items that are revenue and expense items. Match these together and calculate the profit
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
3. Assuming that long-term loans are the only “external debt” arrangement, what is the gearing ratio for Meter Marshall at balance date?
4. What is the return on Shareholders Funds (equity) for Meter Marshall during the 12-month period, assuming a taxation rate of 39%?
5. What is the stock turn ratio for the accounting period, at balance date?