BA (Hons) Global Business Management
Module Name: Financial Analysis
Module Code: AC2407
Assignment 1 – Question Paper
Answer ALL THREE Questions
Question 1 (20 marks)
The following transactions occurred during the year in the records of Quality Medical Clinic:
(a) Billed patients for fees for medical services.
(b) Received payment from patients for accounts received.
(c) Bought equipment which will last ten years.
(d) Paid wages to employees.
(e) Bought supplies on credit.
(f) Paid electricity bill.
(g) Replaced chairs in the waiting room.
(h) Billed the government direct for pensioner patients.
(i) Paid insurance in advance for the next year.
(j) Used bandages and other supplies.
Required:
Indicate the effect (increase, decrease or no effect) on net cash flow and operating profit.
Question 2 (30 marks)
The following information relates to two companies namely Arrow Trading Limited and Becky Trading Limited. Both operate in the same industry.
Arrow Trading Limited
Becky Trading Limited
Cash at bank
$40,000
$20,000
Marketable securities
$120,000
$60,000
Inventory
$640,000
$840,000
Prepayments
$20,000
$40,000
Debtors
$160,000
$300,000
Equipment
$620,000
$800,000
Current liabilities
$500,000
$600,000
Credit sales
$2,200,000
$1,800,000
Cost of good sold
$1,400,000
$1,200,000
Required:
(a) Calculate the following for each company
(i) Current ratio
(ii) Quick asset ratio
(iii) Debtor’s turnover rate
(iv) Stock turnover rate
(b) Compare the apparent performance and stability of the two companies
Question 3 (60 marks)
New World Hotel Limited has just started in business this year.
(a) During the year purchase (all for cash) were:
Beer $464,300
Wines $314,200
Spirits $230,900
At the end of the year stocks on hand were:
Beer $24,000
Wines $103,900
Spirits $46,900
Required:
What was the cost of the beer, wines and spirits sold by the hotel during the year?
(b) Sales (all for cash) during the same period were:
Beer $764,000
Wines $285,000
Spirits $468,800
Required:
(i) Prepare a cash flow statement for the drinks trading.
(ii) Prepare a profit and loss statement for the drinks trading.
(iii) Which part of the trade is most profitable? Discuss.
Assignment Due Date : 17th October 2007
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