financial statements | My Assignment Tutor

FLINDERS UNIVERSITY COLLEGE OF BUSINESS GOVERNMENT AND LAW BUSN9035 BUSINESS ACCOUNTING S1, 2021 SECOND WRITTEN INDIVIDUAL ASSIGNMENT Due Date: Monday 7th June 2021 at 10:00pm This assignment is marked out of 100 and will comprise 40% of the overall assessment for this topic General Requirements 1. Workings – You must show any relevant calculations and workings. 2. Due date – Lodgment of your assignment is expected prior to the due date and time. If exceptional circumstances lead to the requirement for an extension, you must apply for that extension prior to the due date via the assignment extension tool on FLO, complete with supporting documentation. Otherwise, a late lodgment penalty applies of 5% of the allocated mark per day or part thereof overdue, up until the return date of the assignment. Assignments submitted after the return date will not be marked. 3. Lodgement – Lodge a single PDF file of your assignment. Yo u ma y w i sh to prepare your tables in Excel and embed them into a Word document prior to conversion to PDF. Alternatively, you may wish to work in Excel and then convert to a PDF format. Take note of any pagination issues so your assignment is presented properly. 4. Text-matching – Please submit your assignment through the text-matching tab on FLO. This is for your feedback before final submission of the assignment. 5. Academic integrity – Please be aware that you MUST abide by the University policy on academic integrity. For details on academic integrity for students, please refer to: Especially note that collusion, which is collaborating with another person on the preparation of answers for an individual assignment, is a breach of academic integrity. ALL work submitted must be your OWN. While discussing problems with other students is encouraged as a useful way to enhance your understanding of a topic, you should discuss lecture, textbook and tutorial examples for this purpose, NOT your assignment question. Part- A QUESTION ONE The financial statements for H. G. Meyer Proprietary Limited are as follows: H. G. Meyer Proprietary Limited Statement of Profit or Loss For year ended 30 June 20X2 Sales $777,104 Less: Cost of sales 662,093 Gross profit 115,011 Less: Operating expenses Selling and administrative expenses $17,804 Wages expense 15,263 Depreciation expenses 7,428 Other operating expenses 2,011 42,506 Operating profit 72,505 Less: Interest expense 6,452 Profit before tax 66,053 Less: Income tax expense 25,232 Profit after tax $40,821 H. G. Meyer Proprietary Limited Balance Sheets As at 30 June 20X1 20X2 Current assets Cash $11,451 $12,844 Cash equivalents – 33,995 Accounts receivable 64,199 52,599 Inventory 69,814 75,366 Prepaid expenses 4,037 4,544 Total current assets 149,501 179,348 Non-current assets Motor vehicles (net) 26,190 15,747 Plant and equipment (net) 118,810 153,856 Total non-current assets 145,000 169,603 Total assets 294,501 348,951 Current liabilities Accounts payable 34,327 41,099 Notes payable 14,544 25,907 Income tax payable 25,526 25,232 Other expenses payable 22,854 26,179 Total current liabilities 97,251 118,417 Non-current liabilities Long-term debt 75,817 77,006 Total non-current liabilities 75,817 77,006 Total liabilities 173,068 195,423 Net assets $121,433 $153,528 Paid-up capital and reserves Ordinary shares* $27,180 $31,380 Retained earnings 94,253 122,148 Total shareholders’ equity $121,433 $153,528 * H. G. Meyer Proprietary Limited issues all of its ordinary shares @ $10 per share paid to $10 per share. Required Calculate the following financial ratios for H. G. Meyer Proprietary Limited. (Assume all sales/purchases of inventory are credit sales/purchases). Return on ordinary shareholders’ funds/return on equityReturn on capital employedOperating profit marginGross profit marginAverage inventories turnover periodInventories turnoverAverage settlement period for accounts receivableAverage accounts receivable turnoverAverage settlement period for accounts payableAverage accounts payable turnoverSales revenue to capital employedCurrent ratioAcid test/liquidity ratioFinancial gearing (leverage) ratioInterest coverage ratio/times interest earnedDividend payout ratioEarnings per share ratio [30 Marks] QUESTION TWO Explain why financial analysts place their trust in ratios rather than absolute values. [8 Marks] QUESTION THREE Read the following quote and discuss what you think Fridson and Fernando (2002) meant when they used the phrase ‘passively calculating standard ratios’. Corporations have substantial incentives to exploit the fact that accounting principles are neither fixed for all time nor so precise as to be open to only a single interpretation. Analysts, who appreciate the magnitude of the economic stakes, as well as the latitude available under the accounting rules, will see clearly that a verdict derived by passively calculating standard ratios may prove dangerously naive. Source: Fridson, M. & Fernando, A., (2002). Financial statement analysis: A practitioner’s guide, 3rd Edition, John Wiley & Sons, New York. [12 Marks] Part- B Please answer all questions as precise as possible. Each question caries equal marks. 1. Suppose the Central Bank sells government bonds. Use a graph of the money market to show what this does to the value of money. [10 Marks] 2. Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. The Central Bank increases the money supply; b. People decide to demand less money at each value of money [10 Marks] 3. Inflation distorts relative prices. What does this mean and why does it impose a cost on society? [10 Marks] 4. If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional? [10 Marks] 5. Nathalie makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Nathalie’s payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th. [10 Marks] Preparation Please ensure that you are aware of the University’s Academic integrity policy. The lecture slides and textbook readings will give you the basic framework of the ideas, theories and concepts you will need to complete the assignment. These notes may not be sufficient on their own. You will need to make use of additional reading and extra references in preparing your assignment. When you are taking notes for your assignment,try and ‘translate’ what the author is saying into your own words. Don’t just copy out huge chunks from other people’s work, otherwise they will probably end up in your assignment with very little of the wording changed (which is plagiarism). Referencing All sources, whether academic books, journal articles, newspaper, material from the internet etc., must be cited in the main text of your assignment itself


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