In the part A;The report should evaluate the performance of the business in five evaluation areas. The report should be supported by the calculations of ratio. It is important to show all the calculations . In terms of evaluation , you will explain and comment on the implications of number you calculated and state the causes of the number. What is the potential implications of the number for the business , how can the business improve and what steps could be taken to improve the situation. Then critically evaluate the limitations of ratio analysis.

Part B ; criticality evaluate and contrast the use of incremental budgeting versus zero base budgeting explain the two and mention their advantages and disadvantages over one another

2000 +/_ words for both sides. Use appendix for calculations and summary table of ratio

Part A – Marine Time Plc2

You are a financial analyst at Marine Time Plc; a public limited company specialising in manufacturing and distributing medical equipment. The Board of Directors have looked into the financial statements of the company for the last two years and have raised concerns regarding both the company’s profitability and liquidity. The financial statements of Marine Time for the last two years are given below:

Statement of Comprehensive Income for the year ended 31 December

2020 2019
£000 £000 £000 £000
Revenue 19,345 17,890
Less: Cost of sales:
     Opening Inventory 1,000 1,185
     Manufacturing costs 10,340 7,855
11,340 9,040
     Less: Closing Inventory (1,480) (1,000)
(9,860) (8,040)
Gross profit 9,485 9,850
Less: Expenses
Selling & distribution expenses 2,225 1,795
Administrative expenses 985 965
Bad debts written off 565 480
(3,775) (3,240)
Operating profit 5,710 6,610
Less: Interest payable (2,160) (1,565)
Profit before tax 3,550 5,045
Less: Income tax (990) (875)
Profit after tax 2,560 4,170
Less: Dividends paid (1,980) (2,225)
Retained profit for the year     580 1,945

Statement of Financial Position as at 31 December

 

2020 2019
£000 £000
ASSETS

Non-Current Assets (net)
Land and building 15,115 12,250
Equipment 2,350 1,815
Motor vehicles     1,175 680
18,640 14,745
Current Assets
Inventory 1,480      1,000
Trade Receivables 2,650 2,115
Cash          0    675
  4,130 3,790
           
Total Assets   22,770     18,535
           
           
EQUITYAND  LIABILITIES          
Equity
Ordinary shares of £1 each 8,010 8,010
Retained earnings (reserves) 2,150 1,570
10,160 9,580
           
Non-current liabilities
Loan stock (9,300) (6,400)
 

 

Current liabilities
Trade Payables   1,925   1,655
Taxation   1,025      900
Bank overdraft      360            0
    3,310     2,555
           
Total Equity and Liabilities   22,770     18,535
   
           
           
 

Required:

  1. Prepare a report for the Board of Marine Time Plc. that evaluates the performance of Marine Time Plc in relation to profitability, liquidity, gearing, efficiency (asset utilisation) and investor potential. Your report must be supported by the calculation of relevant ratios in the five evaluation areas mentioned above.                                                                                                                            (30%
  2. Calculate the Working Capital Cycle in days for Marine Time Plc based on the information above, assuming 365 days, for the years 2020 and 2019 AND briefly comment on the company’s liquidity position in 2020 compared to 2019. (round to the nearest day)                                                                                                             (10%)
  3. Critically evaluate the limitations of using ratio analysis for both cross-sectional and time-series comparison                                   (10%

All calculations should be clearly shown including all appropriate workings, and should be made to the nearest £000 or two decimal places where required.

Total for Part A: 50%

Part B

Required:

Critically evaluate and contrast the use of traditional budgeting methods in today’s contemporary business environment with another method of your choice. Illustrative examples including numerical or case studies may be used

Total for Paper: 100%

 Notes:

  1. To obtain a high mark, you should:
  2. Make your report concise, precise and well presented and structured;
  3. Draw logical conclusions from accounting information;
  4. Synthesise information in a coherent and useful way;
  5. Show evidence of key text and background reading;
  6. Incorporate your knowledge into an integrated piece of work;
  7. Demonstrate critical understanding of financial management.
  8. Harvard standard referencing is required for the report

2,000 words overall. (plus or minus 10%)