1
The Following Information is available for Dreads :

2011
2012

Operating profit

156
187

Depreciation charge for the year
47
55

Closing Inventory

27
26

Trade Receivables

24
25

Trade Payables

15
14

Required : What is the cash generated from Operating Activities for 2012

£m

Operating Profit (2012)

187

Adjustments:

Depreciation

55

(inc)/dec in Inventory

1

(inc)/dec in Trade Receivables
(1)

inc/(dec) in Trade Payables

(1)

Cash Generated From Operations
241

2
(5.2 p181) The Following information has been taken from the financial statements of Juno PLC

2011
2012

Operating profit

156
187

Depreciation charge for the year
47
55

Closing Inventory

27
31

Trade Receivables

24
23

Trade Payables

15
17

Required : What is the cash generated from Operating Activities for 2012

£m

Operating Profit (2012)

187

Adjustments:

Depreciation

55

(inc)/dec in Inventory

-4

(inc)/dec in Trade Receivables
1

inc/(dec) in Trade Payables

2

Cash Generated From Operations
241

Jubilee Ltd ratio Question : Answers

2011
2012
Comments

1. Gross Margin % = GP/Sales *100

Gross Profit

1600
1150

Sales

4400
4000

GP Margin

36.36%
28.75%

Reduced gross margin (despite falling revenue the cost of sales are higher) - reduced completive performance against market and higher purchasing costs

2. Operating Profit %=OP/Sales *100

Operating Profit

1130
450

Sales

4400
4000

OP margin

25.68%
11.25%
Lower GP margin is compounded by a large increase in operating costs - could indicate management are not keeping close control of operations

3. ROCE % = Operating Profit/Capital Employed

Operating Profit

1130
450
Lower

Equity

3,868
4,192
Higher

Long Term Borrowing
1,000
2,000
Higher

ROCE

23.21%
7.27%
Dramatic reduction - indicates deteriorating financial performance. Would be useful to see competitor ROCEs to see if this is an industry issue.

4. ROE % = Profit for Year/Equity * 100
Profit for Year (after tax)
910
341
Equity

3,868
4,192
ROE %

23.53%
8.13%
Dramatic reduction - much reduced return for investors - has this impacted on share price?
5. Current Ratio =Current Assets/Current Liabilities

Current Assets

2900
2700
Lower

Current Liabilities
1032
1508
Higher

Current Ratio

2.81
1.79
Liquidity has deteriorated - company is now a more risky investment,

6. Acid Test (quick)

Acid Test = (Current Assets-Inventory)/Current Liabs

CA-Inventory

1400
1000

Current Liabs

1032
1508

Acid Test

1.357
0.663
Dramatic Deterioration - as above

7. Gearing : Debt/(Debt+Equity) *100

2011
2012

Debt

1000
2000

Equity

3868
4192

Gearing

20.54%
32.30%

Increased: Risk ? (need to consider financial strategy and interest cover)

8. Inventory Turnover (based on closing not average stock)

2011
2012

Closing Inventory
1500
1700

Cost of sales

2800
2850

Inventory Turnover Days
195.54
217.72
DAYS : High!

9. Av Settlement Trade Payables = Average Payables/Cost of sales *365

2011 Trade Payables

852

2012 Trade Payables

1339

COGS 2012

2850

=
140.30
DAYS
Seems High need to understand policy/strategy/supply chain

10. Av Settlement Trade Receivables = Average Receivables / sales *365

2011 Trade Receivables
900

2012 Trade Receivables
1000

2012 Sales

4000

Seems high need to understand policy/strategy/supply chain

=
86.69
DAYS

11. Both have deteriorated = A

Style Limited

Dyson p 245, 10.9

2011

2012

£ 000
£ 000

£ 000
£ 000
Trading & Profit and Loss