This assignment is about research methods (statistics) in psychology. Please read the article and answer all of the 4 questions in the assignment and keep to the word limit for all questions. I have a

Copyright Warning Notice This material is protected by copyright and has been copied by and solely for the educational purposes of the University under license. You may not sell, alter or further reproduce or distribute any part of this material to any other person. Where provided to you in electronic format, you may only print from it for your own private study and research. Failure to comply with the terms of this warning may expose you to legal action for copyright infringement and/or disciplinary action by the University. ACC OUNTIN G FO R NON-SPE CIALISTS 8.20 L02 8.21 L06 8.22 L06 Refer back to Rea l World 8.1 . Why wou ld the ROE be different for a business like Wesfarmers as compared with Microsoft? Refer back to Real Wor ld 8.3. Discu ss the importance of dividend yie ld on PE ratios and share price. Discu ss the reason s why PE ratios for some companies are much higher than others . Critical ly evaluate the statement that 'financ ial reports are largely based on historica l cost information and are, the1·efore, usefu l in assessing the stewardship (accountability) of management, but of little use to external decision-makers when it comes to allocating scarce resources'. APPLICATION EXERCISES EASY 8.1 LOl/7 8.2 L04 Prepare common size (vert ical ana lysis) reports for the statement of financia l posit ion and income statement shown below . What can you learn from this analysis? - Accounts receivable Inventories Total current assets Non-current assets Tota l assets Statement of financial position extracts as at 30 June 3,000 100,000 120,000 223,000 240,000 463,000 Income statements for the year ended 30 June 16,000 45,000 68,000 129,000 210,000 339,000 20,000 35,000 65,000 120,000 198,000 318,000 2016 2017 Net sales (all credit) Less cost of sales Gross profit Less other expenses General Interest Profit for the year Less tax Profit for the year after tax 600 ,000 (360,000) 240,000 (170,000) (25,000) 45,000 (13,500) 31,500 Complete the following table for the requested ratios and account balances . 2012 2013 2014 2015 2016 Cash $5,200 $? $5,800 $4,200 $1,700 Accounts receivable 1,600 100 7 4,200 7,600 Inventory 2,800 7,300 8,400 9,900 7 Prepayments 300 2,000 8,500 7 8,100 Total current assets $9,900 $? $? $? $? 500,000 (280 ,000) 220,000 (140,000) (15 ,000) 65,000 (19,500) 45,500 2017 $3,000 2,200 8,700 2,600 $16,500 CHAPTER 8 ANALYSIS AND INTERPRET ATION OF FIN ANCI AL STATEMENTS Accounts payable $1,800 $8,500 $5,800 $4,700 $8,900 $? Accrued liabilities 2,000 2,000 3,400 5,700 1,600 4,000 Wages payable 1 500 5 200 2,200 5 600 9 100 7,900 Total current liabilities $5,300 $15,700 $11,400 $16,000 $19,600 $? Current ratio ? 1.07 ? 1.76 1.09 ? Quick ratio ? 0.48 1.31 ? ? 0.26 8.3 L06 Nu Rise Ltd reported the fol lowing figures in its statement of comprehensive income for the yea r ended 30 June 2017. $ Sales 540,000 Cost of goods sold 290,000 Gross profit 250,000 Selling expenses 68,000 General expenses 97,000 Financi al expense (interest) 15,000 Comprehensive income for the year 70,000 Dividends 45,000 Average number of shares 175,000 Share price at year-end $5.60 Compute : • P/E ratio • earn ing s yield • dividend yield • dividend payout ratio • earnings per share • dividends per share . 8.4 L03 Complete the following table for the requested ratios. 2014 2015 2016 2017 $'000 $'000 $'000 $'000 Cash sales 1,500 1,600 1,800 2,200 Credit sales 3,500 4,000 4,500 6,000 Total sales revenue 5,000 5,600 6,300 8,200 Average accounts receivable 210 240 290 400 Cost of sales 3,000 3,800 4,050 5,030 Cash inventory purchases 1,000 1,100 1,200 1,400 Credit inventory purchases 3,000 3,380 3,840 5,160 Total inventory purchases 4,000 4,480 5,040 6,560 Average accounts payable 350 400 390 450 Average inventory held 320 340 365 447 Average total assets less current liabilities 4,200 4,400 4,700 6,000 Average number of employees 111 121 125 133 Inventory turnover period (# of days) ACCOUNTING FOR NON -SPECIALISTS Debtors average settlement(# of days) Creditors average settlement(# of days) Sales revenue to capital employed (times) Sales revenue per employee 8.5 L03/4 An analysis of liquidity and efficiency for ABC Ltd yields the following results : Industry average Ratio Year 1 Year 2 Year 3 Year 3 Current 1.8:1 1.95:1 2.1 :1 2.1 Quick (acid test) 0.9:1 0.85:1 08:1 1: 1 Inventory turnover period 67 days 76 days 94 days 60 days Accounts receivable turnover period 42 days 36 days 32 days 35 days Critically evaluate the liquidity position of ABC Ltd. INTERMEDIATE 8.6 L0l/6 Complete the following table for: • ratio name • ratio focus • ratio formula Name Focus Formula (a) Return on ordinary shareholders' funds/return on equity Profitability (b) Average inventory x 365/Cost of sales (c) Gearing (d) Asset turnover ratio (e) (f) (g) (h) Average sett lement period for accounts receivable (i) Acid test ratio U) Dividend s per share (k) Gross profit margin (I) (m) Dividend yield ratio Efficiency Current assets/Current liabilities Operating profit/Interest expense Profitability (Operating profit/Average long-term capital employed) x 100 Investment Market price per share/ Earnings per share 8.7 L0l/2/3 Business A and Business B are both retailers, but seem to take a different approach to this trade according to the information available, which consists of a table of ratios: Ratio Return on capital employed Return on owners' equity Average settlement period for accounts receivable Business A 20% 30% 63 days Business B 17% 18% 21 days 8.8 LO4/5/6 8.9 LO3/4/5 8.10 LO3/4/5 CHAPTER 8 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS Average settlement period for accounts payable Gross profit percentage Profit percentage Inventory turnover period (a) Explain how each ratio is calculated. 50 days 40% 10% 52 day 45 days 15% 10% 25 days (b) Describe what this information indicates about the differences in each bus iness's approach. If one of them prides itself on persona l service and the other on competitive prices, which do you think is which, and why? (a) The managers of Rebus Transport Ltd discovered that a motor lorry, which was purchased on the last day of the financial year, had been charged to motor running expenses . This discovery was made after the draft annual financial statements had been prepared and after the managers had calculated the follow ing ratios based on these statements: 1 . Gross profit margin 2. Interest cover ratio 3. Sales to capital employed 4. Current ratio. Which TWO of the above ratios wil l change after the error has been corrected in the financial stateme nts? (b) The managers of Carter Engineering Ltd discovered that a long-term loan, which was taken out during the year, had been misclassified as a current liability. Thi s discovery was made after the annual financial statements had been prepared and after the managers had calculated the fol lowing ratios based on these statements: 1. Dividend yield ratio 2. Gearing ratio 3. Current ratio 4. Return on ordinary shareholders' funds. Which TWO of the above ratios will change after the error has been corrected in the financial statements? Gamma Plastics Ltd made a 1-for-2 bonus issue of ordinary shares during the year. Which ONE of the following changes to the financia l ratios of the business will occur as a resu lt of this share issue? A. A decrease in the gearing ratio B. An increase in the acid test ratio C. A decrease in the return on ordinary shareho lders' funds D. A decrease in earnings per share (a) Camus Company has an operating profit margin of 5% and a return on capital employed of 20%. The capital employed in the business is $80 million . What is the sales revenue for the business? (b) Clouseau Co began trading on 1 January and, after only eight months' trading, a fire in one of its two warehouses destroyed all the inventories being held there. The owner of the business reported that sales revenue and purchases to the date of the fire were $180,000 and $160,000 respective ly. Furthermore, there were stil l $40,000 of inventories held in the second warehouse that were not affected by the fire. The business makes a constant gross profit margin of 40% on its sales. What is the value of the inventorie s destroyed by the fire? ACCOUNTING FOR NON-SPECIALISTS . 8.11 L02/5 8.12 L02/5 A common size analysis of the income statements of Justine Ltd is presented below: Answer the following questions, referring to the above inde x analysis : JUSTINE LTD Income statement 2015 2016 2017 Sales 100 100 100 Cost of goods sold 65 63 61 Expenses 28 31 34 Profit 7 6 5 (a) What is a common size report? (b) From the above analysis, which two obvious trends explain the change in profit margin over the three periods? (c) Identify factors that might give rise to these trends. The following details concern the business of N. Shakey, who is worried about the profitability and financial structure of his business at 30 June 20 17, especia lly since the bank is requiring repayment of his overdraft Sales (credit) Cost of sales All other expenses Cash at bank Inventory Accounts recei vab le (net) Non-current assets (net) Accounts payable N. Shakey, cap ital (The balance as at 1 July 2015 was $56,000) Non-current liabilities Inventory at 1 July 2015 was $15,000 Accounts receivable at 1 July 20 15 were $10,000 (a) Calculate the fol lowing rati os for 2016 and 2017: operat ing profit margin ii rate of return on owners' equity iii current ratio iv acid test ratio v gearing vi inventory turnover period . (b) Write a short report to the owner about: profitability ii short-term liquidity iii long-term solvency. 30 June 2016 30 June 2017 $ $ 60,000 90,000 39,000 63,000 12,000 21,000 12,000 (18,000) 18,000 ~ 33,000 12,000 30,000 24,000 48,000 6,000 9,000 60,000 72,000 12,000 8.13 L05/ 6 CHALLENGING 8.14 LOl-7 CHAPTER 8 ANALYS IS AND INTERPRETATION OF FIN ANCIAL STATEMENTS The following finan cial info rmat ion is provided for Metal Recyclers Ltd . Non-current liabilities Paid-up capital ($1 )* Retained profit and reserves -start of year Operating profit for the year Interest Taxation Dividends per share (cents) Average market price per share * All shares initially issued at $1 . (a) Calculate for each year : gearing or leverage level ii earnings per share iii price/earnings (PIE) ratio 2015 $'000 1,200 800 80 270 120 45 5 $1.08 2016 $'000 1,600 800 145 294 160 40 6 $1.12 iv dividend yield (assume that the income tax relating to corporations is 30%) v dividend payout ratio . 2017 $'000 1,600 800 191 325 160 51 7 $1.23 (b) Calculate the historical return on owners' equity for 2016 and 2017, and compare this with the earnings yie ld. (c) Discuss any significant trends or anomalies. Conday and Co. Ltd , in operation for three years, produces antique reproduction furniture for the export market. Its most recent set of accounts is set out below. CONDAY AND CO. LTD Statement of financial position as at 30 November 2017 $'000 $'000 820 I 600 Current assets Accounts receivable Inventory Non-current assets Plant and machinery at cost Less accumulated depreciation Freehold land and buildings Q 1,420 762 Total assets Current liabilitie s Bank overdraft Accounts payable Taxat ion Non-current liabilitie s 12 % debentures Shareholders' equ ity Paid-up capital (issued at $1 eac h) Retained profits 385 665 95 228 990 2 410 1,145 200 700 365 1065 Total liabilitie s and sha reholder s' ec;uity_ 2,410 '---------------=======II 339 . .

I , ! ACCOUNTING FOR NON -SPECIALISTS 8.15 L07 CONDAY AND CO. LTD Statement of comprehensive income for t,he year ended 30 November 2017 $'000 Sales 2,600 . Less cost of sales (1,620) G~p~rt ~ Less other expenses (660 Profit for the year 320 Income tax (95 Profit for the year after tax 225 Proposed dividends (160) Retained 12rofit for the y_,,.;e;,:;a.:...r -----------------~=== 6=5~ =1 Notes: The debentures are secured on the freehold land and buildings. The company has asked an investor to invest $200,000 by purchasing 50,000 new ordinary shares at $4 each. Conday wishes to use the funds to finance further expansion. (a) Assess Conday's financial position and performance, and comment on any features you consider to be significant. (b) State, with reasons, whether or not the investor should invest in the company on the terms outlined. A trend percentage analysis of Damien Ltd is presented below: 2014 2015 2016 2017 Current assets Cash 100 86 73 45 Accounts receivable 100 105 111 123 Inventories 100 101 96 85 Other 100 99 102 101 Non-current assets Property, plant & equipment 100 110 123 145 Investments 100 95 89 79 Intangibles 100 95 90 85 Other 100 98 97 85 Total assets 100 (a) What is trend percentage analysis? (b) From the above, identify potential strengths and weaknesses in the financial management of Damien Ltd over the four-year period. (c) Identify factors that might cause these trends . (d) What are the potential deficiencies in this index (percentage) tool? Convert the above analysis into a 'percentage change' (horizontal analysis) table. Powered by TCPDF (www.tcpdf.org)CHAPTER 8 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS 341 · 8.16 LOl-7 You are presented with the following financial report extracts for WeRHere4U Ltd : 2017 2016 2015 2014 $ $ $ $ Income statement Sales 370,000 310,000 270,000 Cost of sales 174,000 140,000 116,000 Interest 17,000 9,000 4,000 Taxation 30% Other expenses 60,000 56,000 54,000 Statement of financial performance Current assets Inventory 18,000 15,000 17,000 18,000 Accounts receivable 62,000 41,000 31,000 29,000 Total current assets 110,000 72,000 62,000 Non-current assets Property, plant and equipment 140,000 120,000 110,000 Total non-current assets 210,000 190,000 150,000 Total assets 320,000 262,000 212,000 180,000 Current liabilities Accounts payable 30,000 17,000 12,000 11,000 Total current liabilities 70,000 52,000 42,000 Total non-current liabilitie s 110,000 80,000 30,000 Total liabilities 180,000 132,000 72,000 Total shareholders' funds 140 ,000 130,000 140,000 You should note that there are also other current assets, non-current assets, and current liabilities that are not specifically listed in the extracts shown above. (a) For the income statement section, prepare a 'vertical analysis' for the three years (2015-2017) . (b) For the statement of financial position extract, prepare a 'trend percentage' analysis for the three years (2015-2017), the base year being 2015 . (c) Prepare as many ratios as possible from the available information to cover profitability, liquidity, efficiency and gearing . (d) Prepare a report indicating potential strengths and weaknesses in the management of this business, basing it on the analysis of parts (a)-(c). (e) Identify additional information you wo uld require to impro ve your analysis of this company over the period specified. 8.17 LOl-7 Follow up on Real Wor ld 8.2 by updating what you know about Glencore, Arrium, Fortescue or South 32.