Bahbsme 2018/19 Financial Accounting Project- The Finance Director Of Safety Gear Limited
You are the Finance Director of Safety Gear Limited. Safety Gear Limited is an Irish resident company. The company purchases safety clothing from Northern Ireland and resells the clothing to its customers in Dublin.
(Payment to their suppliers is in Sterling). All sales are through the company’s website.
The company has surplus funds and is considering expanding its business activities. You have identified two potential targets companies and the board of directors have asked you to analyse both companies and make a recommendation as to which company to invest in.
Target company one:
Roadsafe Limited is a company based in the Germany. The company manufactures bicycle helmets for the Australian market. The raw material used to make the helmets is no longer available due to safety concerns. Roadsafe are now sourcing replacement materials from Russia.
Target company two:
Specialist Advice Limited writes safety booklets for governments in a number of different countries in Europe.
Summarised financial information in respect of both companies is set out in appendix one.
REQUIREMENT
Write a report to the Board of Directors in which you analyse the financial performance of each company. Your report should also comment on any non financial concerns, if any. (Note – no more than 10 marks will be allocated to ratio calculations)
| APPENDIX ONE | |||||||||
| Statement of Comprehensive Income account | |||||||||
| For the year ended 31 December 2017 | Specialist | ||||||||
| Roadsafe | Advice | ||||||||
| €’ 00 | €’00 | ||||||||
| Sales | 8,973 | 10,320 | |||||||
| Cost of Sales | -6,852 | -7,852 | |||||||
| Gross Profit | 2,121 | 2,468 | |||||||
| Distribution costs | -390 | -370 | |||||||
| Administration expenses | -200 | -200 | |||||||
| Operating profit | 1,531 | 1,898 | |||||||
| Interest expense | -16 | -18 | |||||||
| Net profit before tax | 1,515 | 1,880 | |||||||
| Taxation | 120 | -130 | |||||||
| Net profit after tax | 1,635 | 1,750 | |||||||
| Statement of Financial Position | |||||||||
| As at 31 December 2017 | |||||||||
| Specialist | |||||||||
| Roadsafe | Advice | ||||||||
| €’ 00 | €’ 00 | €’ 00 | €’ 00 | ||||||
| Non Current Assets | (see note 1) | 7,600 | 4,000 | ||||||
| Current Assets | |||||||||
| Inventory | 275 | 120 | |||||||
| Trade receivables | 310 | 400 |
| Deposits | 8 | 15 | ||||||
| Bank | 7 | 2 | ||||||
| 600 | 537 | |||||||
| Total assets | 8,200 | 4,537 | ||||||
| Equity and Liabilities | ||||||||
| Ordinary shares €0.50 | 3,000 | 1,000 | ||||||
| Retained earnings | 4,426 | 2,816 | ||||||
| Revaluation reserve | 0 | 100 | ||||||
| 7,426 | 3,916 | |||||||
| Non current liabilities | ||||||||
| 10% Loan note | 160 | 180 | ||||||
| Government grant | 120 | 0 | ||||||
| 280 | 180 | |||||||
| Current liabilities | ||||||||
| Bank overdraft | 3 | 0 | ||||||
| Trade payables | 382 | 330 | ||||||
| Interest payable | 4 | 6 | ||||||
| Dividends payable | 25 | 10 | ||||||
| Taxation | 80 | 95 | ||||||
| 494 | 441 | |||||||
| Total equity and liabilities | 8,200 | 4,537 | ||||||
| Note 1: – Non Current Assets | ||||||||
| Roadsafe | Specialist Advice | |||||||
| Cost/ | Cost/ | |||||||
| Market value | Accumulated | NBV | Market | Accumulated | NBV | |||
| Depreciation | Value | Depreciation | ||||||
| €’00 | €’00 | €’00 | €’00 | €’00 | €’00 | |||
| Land | 3,300 | 3,300 | 3,400 | 3,400 | ||||
| Machinery | 6,000 | 1,700 | 4,300 | 2,800 | 2,200 |
