Why is analysis of financial statements carried out

So that the analyst can determine a company’s accounting policies

So that the significance of financial statements can be better understood through comparisons

with historical performance and with other companies

To get back to the ‘real’ underlying figures, without the numbers being skewed by the

requirements of International Financial Reporting Standards

To produce a report that can replace the financial statements, so that the financial statements

no longer need to be looked at

A company has the following details extracted from its statement of financial position：

$'000

Inventories 1,900

Receivables 1,000

Bank overdraft 100

Payables1,000

The industry the company operates in has a current ratio norm of 1.8. Companies who manage liquidity well in this industry

have a current ratio lower than the norm.

Which of the following statements accurately describes the company’s liquidity position

Liquidityappears tobewell managed asthe bankoverdraft is relatively low

Liquidityappears tobepoorly-controlledasshownbythelarge payables balance

Liquidityappears tobepoorly-controlledasshownbythecompany’s relatively highcurrent ratio

Liquidityappears tobepoorly-controlledasshownbytheexistence of a bank

A business operates on a gross profit margin of 331/3%. were $680.Gross profit on a sale was $800, and expenses

What is the net profit margin

3.75%

5%

11.25%

22.67%

Which of the following is a ratio which is used to measure how much a business owes in relation to itssize

Asset turnover

Profit margin

Gearing

Return on capital employed

From the following information regarding the year to 31 August 20X6, what is the accounts payable payment period You

should calculate the ratio using purchases as the denominator.

$

Sales43,000

Cost of sales32,500

Opening inventory6,000

Closing inventory3,800

Trade accounts payable at 31 August 20X64,750

40 days

50 days

53 days

57 days

Prepare the consolidated statement of financial position for the Prestend group as at 31 October 20X7.Note. A working should be included for group retained earnings. Disclosure notes are not required.

The summarised statements of profit or loss of two companies, Liverton and Everpool, for the year ended 31 May 20X6 are provided below. Liverton acquired 3,000,000 ordinary shares in Everpool for $3,500,000 on 1 June 20X4. At that time, the retained earnings of Everpool were $200,000 and the fair value of the noncontrolling interest in Everpool was $1,000,000.

STATEMENTS OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MAY 20X6

Liverton Everpool

$'000 $'000

Sales revenue 6,400 2,600

Cost of sales (3,700) (1,450)

Gross profit 2,700 1,150

Distribution costs (1,100) (490)

Administrative expenses (700) (320)

Profit from operations 900 340

Dividends received from Everpool 150 --

Profit before tax 1,050 340

Tax (400) (80)

Profit for the year 650 260

The following information is also available.

(a) Everpool's total share capital consists of 4,000,000 ordinary shares of $1 each.

(b) During the year ended 31 May 20X6 Liverton sold goods costing $110,000 to Everpool for $200,000. At 31 May 20X6, 60% of these goods remained in Everpool's inventory.

【論述題】

Calculate the total goodwill arising on the acquisition of Everpool.

Prepare the consolidated statement of profit or loss for Liverton for the year ended 31 May 20X6.

Compare and comment on the performance of the companies as indicated by the ratios you havecalculated in part (1).