Excel Leisure Ltd

Income Statement for the year ended 31st December 2012

Turnover 63,983
Cost of Sales (35,897)
Gross Profit 28,086
Operating Expenses (10,024)
Operating Profit (PBIT) 18,062
Interest received/(paid) (2,280)
Profit/(Loss) before taxation 15,782
Taxation (3,156)
Profit/(Loss) after Tax for year 12,626

Statement of Financial Position as at 31st December 2012

Non-Current Assets
Investments 4,381
Intangible Fixed Assets 6,072
Tangible Fixed Assets 90,685
Current Assets
Inventories 471
Trade receivables 11,136
Cash at bank 3,099
Other receivables 2,102

Total Assets 117,946

Equity Shareholders’ Funds
Share Capital 25,459
Profit and Loss Account 47,626

Non-Current Liabilities
Long Term Loans 23,180

Current Liabilities
Bank loans and overdrafts 11,242
Other payables 6,969
Trade payables 3,470

Total Equity & Liabilities 117,946

1. Briefly describe the following performance ratios, giving formulas and the significance of each ratio.

Please use versions of formulas applied in class.

Ratio Industry Average
a. Current Ratio; (1.5:1)
b. Inventory Turnover Period (50 days)
c. Payables Payment Period (55days)
d. Receivables Collection Period (40days)
e. Operating Cash Cycle (35days)
f. Gross Profit Margin (30.0%)
g. Net Profit Margin (28.0%)
h. Return On Capital Employed (62.0%)
i. Gearing (22.0%)
j. Interest Cover (8.0 times)
(30 marks)

2. Calculate all the above (Ten) ratios for Excel Ltd for the year ended 31 December 2012. (10 marks)
3. Comment on the performance of Excel Limited by comparing the company’s ratios with the given industry averages. Suggest possible explanations for, and likely consequences of any significant differences between the company ratios and the industry averages.
(20 marks)

4. a) Compare and contrast Sole Proprietorship and Limited Companies, giving the advantages and disadvantages of each type of business.
b) Discuss the different Sources and Uses of Medium and Long Term funds available to a Limited Company.
(40 marks)
Total (100 marks)