The other income exceptional item in 2010 arose from the disposal of property assets. The exceptional distribution costs and administration cost in 2009 arose mainly from the impairment of property asset values... Let us now move towards a ratio analysis of the company for the years 2009 and 2010. The current ratio for year 2009 is 0.49: 1 and for year 2010 it dropped to 0.19:1. This is quite alarming as it means that for every ?1 of its current or short term liabilities, it has only 19 pennies to meet this exigency. No wonder, it had to resort to a sale of land to get some more of the needed cash. The working capital deficiency dropped from ? 23.7 m in year 2009 to ? 101 m in year 2010. On the other hand, the total debt to total assets ratio remained fairly constant in both years, being 0.48: 1 in 2009 and 0.49: 1 in 2010 respectively. However, this means that in the case of liquidation of the company, the creditors can expect only about 50 pence to the pound at most for the clearance of their claims. This is indeed a sorry state of affairs. So both the short term and the long term solvency of the business are in question at this point (Meigs & Meigs, 1993, 943). Looking at the gross margin percentages for year 2009 and year 2010, we see that this figure remained constant at around 67 percent for the company. However, the net margin percentage has nearly doubled, from 4 percent in 2009 to 8 percent in 2010. This is a good improvement. Now we move on to an analysis of Recievables Turnover, which was 13 times in 2009 but improved slightly to 14.5 times in 2010. The asset turnover for both years 2009 and 2010 remained around 0.55 times. On the other hand, Inventory Turnover recorded a slight drop from 11 times in 2009 to 9 times in 2010. The Return on Assets, which was 2 percent in 2009, improved to 4 percent in 2010. Finally, the Return on Equity which was 4.5 percent in 2009 doubled to 9 percent in 2010. So, all in all, we can say that there remains little improvement in the company’s financial state of affairs and it would be better not to invest in this company at the present time. Sincerely, Investment Advisor Q.2. Appraisal of Different Products: Pacioli Accounting Software Systems Ltd. The finance director of any firm is most often concerned about two things: how to get surplus cash for investment and how to invest the surplus cash so as to get the best possible return. The Finance Director of Pacioli Accounting Systems is similarly trying to decide about investing in one of the three different tax accounting software packages which
In the case given, we see that Fuller, Smith and Turner Plc has its financial year ending on the 27th of March 2010. Further we see from the Comprehensive Income Statement that there is a seperation of amounts before exceptional items and that from exceptional items.Exceptional items are usually defined as one-off transactions that may not be repeated in the normal course of business, e.g…
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9 pages (2250 words)Assignment
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