Topic: financial statement McCrea plc UK

SECTION A – ACCOUNTING

McCrea plc is a UK manufacturer of garden furniture. The company has provided the following financial statements:

Statement of Financial Position as at 31 December 2019:

        £’000
Assets 
Non-current assets 
Property1,050
Plant and equipment850
Current assets 
Inventory640
Trade receivables1,230
Cash80
  
Current liabilities 
Trade payables850
Taxation40
Bank overdraft125
Interest payable30
  
Non-current liabilities and equity 
Long term loans700
£1 ordinary shares750
Reserves1,355

Income Statement for the year ended 31 December 2019:

 £’000
Sales revenue12,100
Cost of goods sold(9,590)
Gross profit2,510
Operating expenses(1,935)
Operating profit575
Interest expense(50)
Net profit before tax525
Taxation(115)
Net profit for the year410

Required:

(a)Calculate the following ratios for McCrea plc in 2019.

  • Return on Capital Employed (ROCE)
  • Operating profit margin
  • Inventories’ turnover period
  • Settlement period for trade receivables
  • Current ratio
  • Acid test ratio
  • Gearing ratio
  • Interest cover ratio
  • Earnings Per Share (EPS)

All calculations (including the ratio formulas) must be clearly shown.

   (9 marks)

(b)The ratios set out in the table below are those calculated for McCrea plc based on its published financial statements for the previous year (2018)

Return on Capital Employed (ROCE)15.01%
Operating profit margin4.9%
Inventories turnover period19 days
Settlement period for trade receivables41 days
Current ratio1.63
Acid test ratio1.35
Gearing ratio37.44%
Interest cover ratio8.7 times
Earnings Per Share (EPS)22.8p

Using the ratios you calculated (in part a) for McCrea plc in 2019 and the above ratios for 2018, comment on the company’s performance and financial position for the two years.

(24 marks)

(Total: 33 marks)

(maximum 200 words in total.  Tables, calculations, annotations for worked answers do not count in the word limit)

Type of service-Academic paper writing
Type of assignment-Coursework
Subject-Accounting
Pages / words-2 / 550
Academic level-Undergraduate
Paper format-Harvard
Line spacing-Double
Language style-UK English

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