Hello! look at the attached images and answer: (a) Calculate ratios for the year ended 31 December 2021 (showing your workings) for Primrose Plc, equivalent to those provided above. i. Return on year-end capital employed ii. Net asset turnover iii. Gross profit margin
Hello! look at the attached images and answer: (a) Calculate ratios for the year ended 31 December 2021 (showing your workings) for Primrose Plc, equivalent to those provided above. i. Return on year-end capital employed ii. Net asset turnover iii. Gross profit margin
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 19BEA
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Question
Hello! look at the attached images and answer:
(a) Calculate ratios for the year ended 31 December 2021 (showing your workings) for Primrose Plc, equivalent to those provided above.
i. Return on year-end capital employed
ii. Net asset turnover
iii. Gross profit margin
iv. Net profit margin
v.
vi. Closing inventory holding period
vii. Trade receivables’ collection period
viii. Trade payables’ payment period
ix. Dividend yield
x. Dividend cover
(b) Analyse the financial performance and position of Primrose Plc for the year ended 31 December 2021 compared to 31 December 2020.
(c) Explain the uses and the general limitations of ratio analysis.
Thanks a lot!
![Notes:
(i)
Primrose Plc received £120 million from the sale of plant that had a carrying amount
of £80 million at the date of its sale.
(ii)
The market price of Primrose Plc's shares throughout the year averaged £3.75 each.
There were no issues or redemption of shares or loans during the year.
(iii)
(iv)
Dividends paid during the year ended 31 December 2021 amounted to £90 million,
maintaining the same dividend paid in the year ended 31 December 2020.
Below are ratios calculated for the year ended 31 December 2020.
Return on year-end capital employed (profit before interest and tax over
total assets less current liabilities)
28.1%
Net asset (equal to capital employed) turnover
4 times
Gross profit margin
17%
6.3%
Net profit (before tax) margin
Current ratio
1.6:1
46 days
45 days
Closing inventory holding period
Trade receivables' collection period
Trade payables' payment period
Dividend yield
55 days
3.75%
Dividend cover
2 times](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc0c82515-d9d3-4903-a8db-892a00f55682%2Fe9b12123-1fb2-4dab-810c-5c90d2fa10a7%2F7e55l9_processed.png&w=3840&q=75)
Transcribed Image Text:Notes:
(i)
Primrose Plc received £120 million from the sale of plant that had a carrying amount
of £80 million at the date of its sale.
(ii)
The market price of Primrose Plc's shares throughout the year averaged £3.75 each.
There were no issues or redemption of shares or loans during the year.
(iii)
(iv)
Dividends paid during the year ended 31 December 2021 amounted to £90 million,
maintaining the same dividend paid in the year ended 31 December 2020.
Below are ratios calculated for the year ended 31 December 2020.
Return on year-end capital employed (profit before interest and tax over
total assets less current liabilities)
28.1%
Net asset (equal to capital employed) turnover
4 times
Gross profit margin
17%
6.3%
Net profit (before tax) margin
Current ratio
1.6:1
46 days
45 days
Closing inventory holding period
Trade receivables' collection period
Trade payables' payment period
Dividend yield
55 days
3.75%
Dividend cover
2 times
![Primrose Plc's summarised financial statements for the year ended 31 December 2021 are
set out below:
Income statement
£million
Revenue (25% cash sales)
4,000
Cost of sales
(3,450)
Gross profit
550
Operating expenses
(370)
180
Profit on disposal of plant (note (i))
40
Finance charges
(20)
Profit before tax
Income tax expense
Profit for the period
Statement of financial position
Non-current assets
Property, plant and equipment (note (i))
Current assets
Inventory
Trade receivables
Bank
Total assets
Equity and liabilities
Equity shares of 25 pence
Retained earnings
Non-current liabilities
8% loan notes
Current liabilities
Bank overdraft
Trade payables
Current tax payable
Total equity and liabilities
£million
250
360
nil
10
430
40
200
(50)
150
£million
550
610
1,160
100
380
480
200
480
1,160](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc0c82515-d9d3-4903-a8db-892a00f55682%2Fe9b12123-1fb2-4dab-810c-5c90d2fa10a7%2Fqqpydh5_processed.png&w=3840&q=75)
Transcribed Image Text:Primrose Plc's summarised financial statements for the year ended 31 December 2021 are
set out below:
Income statement
£million
Revenue (25% cash sales)
4,000
Cost of sales
(3,450)
Gross profit
550
Operating expenses
(370)
180
Profit on disposal of plant (note (i))
40
Finance charges
(20)
Profit before tax
Income tax expense
Profit for the period
Statement of financial position
Non-current assets
Property, plant and equipment (note (i))
Current assets
Inventory
Trade receivables
Bank
Total assets
Equity and liabilities
Equity shares of 25 pence
Retained earnings
Non-current liabilities
8% loan notes
Current liabilities
Bank overdraft
Trade payables
Current tax payable
Total equity and liabilities
£million
250
360
nil
10
430
40
200
(50)
150
£million
550
610
1,160
100
380
480
200
480
1,160
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