Financial Analysis and Accounting Concepts: Users, Ethics, Ratio Analysis, and Cost Accounting
Overview
This coursework assignment assesses understanding of fundamental accounting concepts and financial analysis techniques. It covers the conceptual framework of financial reporting, professional accounting ethics, financial ratio analysis for ABC Ltd, liquidity assessment, and the preparation of a cost of goods manufactured schedule for Bailey Furniture Ltd.
What this coursework covers
- Conceptual Framework: Primary users of financial information and their uses
- Professional Ethics in Accounting: Definition and ethical behaviour standards
- Financial Ratio Analysis: Calculation of seven key ratios for ABC Ltd including liquidity, efficiency, and profitability metrics
- Liquidity Assessment: Commentary on company liquidity based on calculated ratios
- Cost Accounting: Preparation of Cost of Goods Manufactured Schedule for Bailey Furniture Ltd
Preview
Question 1 (10 marks)
a) Identify the primary users and their uses of financial information as outlined in the Conceptual Framework. (5 marks)
[Answer here]
b) What does the word ‘ethics’ mean? Explain what is considered ethical behaviour for an accountant. Use your own example to explain your point. (5 marks)
[Answer here]
Question 2 (20 marks)
The comparative statements of ABC Ltd are presented here:
ABC Ltd, Income Statement (extract), for years ended 30 June 2018
2018 2017
$ $
Net Sales 3,637,000 3,501,000
Cost of sales 2,011,000 1,992,000
Gross Profit 1,626,000 1,509,000
Selling and administrative expenses 1,012,000 958,000
Finance costs 36,000 38,000
Profit before income tax 578,000 513,000
Income tax expense 173,400 154,000
Profit for the period 404,600 359,000
ABC Ltd, Statement of Financial Position, as at 30 June 2018
2018 2017
Assets $ $
Current assets
Cash 129,800 128,400
Marketable securities 500,000 400,000
Accounts Receivable (net) 300,000 205,600
Inventory 400,000 231,000
Total current assets 1,329,800 965,000
Non-current assets
Property, plant and equipment (net) 1,250,600 1,040,600
Total assets 2,580,400 2,005,600
Liabilities and Equity
Current liabilities
Accounts payable 300,000 290,800
Income taxes payable 87,000 84,000
Total current liabilities 387,000 374,800
Non -current liabilities
Notes payable 720,000 700,000
Total liabilities 1,107,000 1,074,800
Equity
Share capital ($10 each) 900,000 600,000
Retained earning 573,400 330,800
Total Equity 1,473,400 930,800
Total Liabilities and Equity 2,580,400 2,005,600
All sales were on account. Net cash provided by operating activities for the year ended 30 June 2018 was $760,000. The weighted average number of shares is 150 274.
Required:
1. Calculate the following ratios for the 2018 financial year. (14 marks) Marks will be deducted if no workings are shown.