Answer Happy

Task 1 is completed. Can someone help with task 2 please? I've
attached my answers for task 1 for reference.
1 (A) Consolidated Income statement 2 3 4 52 weeks ended 1st September 2018 Total (£m) 2277 52 weeks ended 2nd September 2017 Total (£m) 2335 -2070.2 264.8 -2261.9 15.1 -135.1 -143 -353.4 -481.3 2.3 -58.4 71.3 0.1 -12.4 59 - 10.2 -12.5 -491.5 31.3 -460.2 48.8 1 Sept 2018 Em 2 Sept 2017(£m) 619.4 603.7 20.4 991.9 654.9 19.3 1666.1 1243.5 5 Revenue 6 Cost of sales 7 Gross profit 8 Distribution costs 9 Administrative expenses 10 Operating loss/profit 11 Financial income 12 Finance costs 13 (Loss)/Profit before taxation 14 Taxation 15 (Loss)/Profit after taxation 16 17 (B) Consolidated Balance Sheet 18 19 20 21 Assets 22 Non-current assets 23 Intangible assets 24 Property, plant and equipment 25 Trade & other receivables 26 27 Current Assets 28 Inventories 29 Trade & other receivables 30 Cash and cash equivalents 31 32 Liabilities 33 Current liabilities 34 Borrowings 35 Trade & other payables 36 Net Current liabilities 37 38 Non-current liabilities 39 Borrowings 40 Other non-current liabilities 41 Provisions 42 43 Net Assets 44 Equity 45 Share capital 46 Retained earnings 47 Other reserves 48 Total equity 49 50 396 81.3 374.1 82.9 40 42.7 520 497 -116.4 -165.6 -615.6 -579.6 -696 -781.2 -356.2 -354.4 -66.3 -776.9 205.4 -199.5 -351.7 -9.7 -560.9 906.2 121.3 -94.5 178.6 424 243.3 238.9 205.4 906.2
Option 1 - An evaluation of a given company's financial state (A) Task 1: Ratio Analyses (40 marks in total) Conduct the required ratio analyses using the given data from the excel file. Explain the meaning and use of each financial ratio found and show all the calculations of the ratios in full. 1. Liquidity Ratios (10 marks) a) Quick ratio b) Current ratio 2. Profitability ratios (10 marks) a) Net Profit ratio b) Return on equity c) Operating profitability ratio d) Return on capital employed 3. Leverage ratios or Solvency ratios (10 marks) a) Long-term Debt ratio b) Debt equity ratio c) Total debt ratio 4. Efficiency Ratios (10 marks) a) Asset Turnover ratio b) Inventory Turnover ratio c) Days' sales in inventory (B) Task 2: Financial health analysis and planning (60 marks in total) Analyse the given financial data of a UK company and answer all three questions below. (1) Based on the results of the financial ratios found in part A, how would you describe the financial health of this company? Explain and elaborate your analysis. (20 marks) (2) Based on the figures from the consolidated income statement and the balance sheet, identify the key drivers to the success or failure of the company in 2019. Explain and elaborate your answer. (20 marks) (3) Give 3 suggestions on how the company should plan to deal with its major financial issues as indicated from its consolidated income statement and the balance sheet. (20 marks)
TASK 1 Liquidity Ratios: a) Quick Ratio = Quick assets Current Liabilities Current assets - Stock Current Liabilities In 2018 520 - 396 781.2 In 2017 497 - 374.1 696 0.15873 0.17658 Decreased b) Current Ratio = Current assets Current Liabilities In 2018 520 781.2 66.5643% In 2017 497 696 71.408% Decreased These Liquidity ratios represent the company's ability to meet the short-term obligations of the company. These ratios represent how effectively the company is maintaining its current assets to make better operations. The company is facing a declining trend, which is not beneficial. Profitability Ratios: a) Net Profit Ratio = Net Profit X100 Sales In 2018 -460.2 -X100 2277 (20.2108%) In 2017 48.8 X100 2335 2.0899 Decreased
b) Return on Equity Net Profit -X100 Equity = In 2017 In 2018 -460.2 -X100 205.4 (224.05%) 48.8 -X100 906.2 5.385% Decreased c) Operating Profitability Ratio = EBIT X100 Sales In 2018 In 2017 -481.3 2277 -X100 71.3 2335 X100 (21.1375%) 3.0535 Decreased d) Return on capital employed EBIT -X100 capital emloyed In 2018 In 2017 -481.3 -X100 205.4 (234.32%) 71.3 X100 906.2 7.868 Decreased Profitability ratios show how the profit of a company is related to other aspects of the company like sales equity, capital employed etc. The company's profitability ratios are all decreasing, due to recent losses of the company. Leverage Ratios: a) Long-term debt ratio long term debt -X100 equity In 2018 356.2 + 354.4 X100 205.4 In 2017 199.5 + 351.7 -X100 906.2 3.4596 0.6083 Increased
b) Debt equity ratio = total debt equity current liabilities + non current liabilit equity In 2018 781.2 + 356.2 + 354.4 -X100 205.4 In 2017 696 + 199.5 + 351.7 -X1001 906.2 7.2629 1.3763 Increased c) Total debt total debt total assets ratio current + non current liability current + non current assets In 2018 781.2 + 776.9 - 66.3 1243.5 + 520 In 2017 696 + 566.9 -9.7 1666.1 + 497 0.8459 0.5779 Increased Leverage ratios shows the amount of debt is financed in the company in comparison to other aspects of the business. A business cannot decide whether or not they are making good leverage ratios or performing well by just looking at leverage ratios. These leverage ratios should be looked at alongside the industry averages, then the company can clearly understand and form an opinion. Based on the calculations above, the company's leverage ratios are increasing, therefore it will decrease the solvency of the company. Efficiency Ratios: a) Asset turnover ratio = net sales average total assets In 2018 In 2017 2277 520 + 1243.5 2335 1666.1 + 497 = 1.2912 1.0795 Increased
This ratio determines how effective the company is in using its assets to generate sales. b) Inventory turnover ratio = costs of goods sold average inventory In 2018 In 2017 2261.9 (374.1 + 396)/2 5.8743 times 2070.2 374.1 5.5332 times Increased This ratio determines how much of inventory is left to meet the predicted sales of the company. This ratio should be compared with the industry average before conducting and analysis on the business. This ratio should be lower in order to make a lower cash conversion cycle. c) Days sales in inventory = average debtors x 365 credit sales In 2018 In 2017 81.3 2277 X 365 82.9 2335 x 365 13.03 days 12.0586