SOLUTION: International Foundation Programme | My Assignment Tutor

1International Foundation Programme (Business)Business OperationsWritten Assignment – Financial Report Surname:Veretco- RazmeritaForename:DianaBanner ID:Cohort:Submission Date:Course tutor: 2IntroductionThis report will analyse and will provide the information about financial performance of Elite plcfor two years 2018 and 2019. There will be ratio calculations and analysis of the business for thecompany, like profitability, liquidity and efficiency; and these are gross operating profit ratio,operating profit ratio, return on capital employed, current ratio, acid test ratio, trade receivablesturnover, trade payables turnover and non-current asset turnover.2-3 sentences on what the report is/its purpose2-3 sentences on the calculations (ie list them)2-3 sentences on what the analysis will includeEXAMPLE : This report will show the financial performance of Elite plc for the two years 2018 and2019 using the accounts for these two years. Several calculations have been carried out and theseare x, x, x, x, x, x and x. After each calculation there will be an analysis of the results andrecommendations will be made to the senior managers about what could be done to improve thecompany’s financial performance.3Ration Calculations for 2018 and 2019Gross Operating Profit Ratio Formula20182019Gross Profit/Net Sales x100600,000/3,000,000 x 100 = 20%1,080,000/5,400,000 x 100 = 20%AnalysisThe calculation shows that the gross profit for Eliteplc, for two years2018 and 2019, have the same percentage of 20%, withouthavingchanged. So, for every £1 the company earned20p.RecommendationI recommend for increasing the gross profitratio for next year, thecompany should investigate why % didn’t increased and to be awareto not decrease in the following year. The company could raise thenegotiate with the suppliers, or find cheaper suppliers. Gross Operating Profit Ratio AnalysisOperating Profit Ratio Formula20182019Operating Profit/Net Sales x100240,000/3,000,000 x 100 = 8%580,000/5,400,000 x 100 = 10.74%AnalysisThe analysis shows that the operating profit ratio peak was in 2019,with a percentage of 10.74%. Why this happened, link with grossprofit %. Something happened with one of the components, what isincreasing, that percentage increased?RecommendationWhat need to be investigated to increase the %? Operating Profit Ratio AnalysisReturn on Capital Employed Formula20182019ProfitBeforeInterest /CapitalEmployed x 100(CapitalEmployed =ordinaryshare capital +reserves +noncurrentliabilities)240,000/840,000x 100=28%140,000 +260,000 + 440,000 =840,000580,000/ 1,300,000x 100 = 44%240,000 + 560,000 + 500,000 =1,300,000AnalysisHas been an improved there? The cause;what happened with theprofit before tax; what is happening with. Good or not good? What toexpect in next year?Recommendation Return on Capital Employed Analysis4Current Ratio Formula20182019CurrentAssets / CurrentLiabilities876,000 / 400,000 = 2.19:12,252,000 /1,464,000 = 1.53:1AnalysisWhatcauses that result? Payables and overdraft? What they need toimprove?Recommendation Current Ratio AnalysisAcid Test Ratio Formula20182019(Current Assets– Inventory) /Current Liabilities(876,000– 480,000)/400,000 =0.99:1(2,252,000– 1,440,000)/1,464,000= 0.55:1AnalysisThe definition for each ratio calculationRecommendation Acid Test Ratio AnalysisTrade Receivables Turnover Formula20182019Trade receivables /CreditSales x365396,000 /3,000,000 x 365 =49days812,000/5,400,000 x 365 =55 daysAnalysisDue to the function, what they could do to improve thisRecommendationIncreasing therevenue or increase sales. 30 days is close to beacceptable. Trade Receivables Turnover AnalysisTrade Payables Turnover5 Formula20182019TradePayables /CreditPurchases (cost of goods sold)x365320,000/2,400,000 x 365 =49days724,000/4,320,000 x 365 =62daysAnalysisGetting better or worse,consequences, who is responsible for this,for the function.Recommendation Trade Payables Turnover AnalysisNon-current Asset Turnover Formula20182019NetSales/ Non-CurrentAssets (NBV)3,000,000/364,000 = 8.24times5,400,000/512,000 = 10.54 timesAnalysisExplain what arenon-current, why do we need them. productivity,utilisation and maximization. Improving ore getting worse., assets,values. How they can improve this turnover.Recommendation Non-current Asset Turnover AnalysisReferencesLee Coutts, Book Higher Business management Reference page 150, 158-165https://www.aatcomment.org.uk/learning/study-tips/ratio-analysis-of-financial-statements/https://www.accaglobal.com/vn/en/student/exam-support-resources/fundamentals-examsstudy-resources/f2/technical-articles/ratio-analysis.html