BALANCE SHEETCurrent Assets

Inventory of Raw Materials 18000Inventory of Finished Goods 28000Trade Debtors 34000

80000Non Current Assets

Freehold land and buildings 245000Plant and Machinery 127000Delivery Vehicles 54000

426000TOTAL ASSETS 506000

Current LiabilitiesBank Overdraft 22000Trade Creditors 23000

45000Non Current Liabilities

Loan from NAB 100000

TOTAL LIABILITIES 145000NET ASSETS 361000

EquityCapital 361000

361000

BALANCE SHEETCurrent Assets

Bank 73000Trade Debtors 38000Inventory 17000

128000Non Current Assets

Furniture & Fittings 63000Motor vehicle 10000Freehold 145000

218000TOTAL ASSETS 346000

Current LiabilitiesTrade Creditors 24000

TOTAL LIABILITIES 24000NET ASSETS 322000

EquityCapital 313000Profit 9000

322000

Assets =Bank Debtors Inventory Furn & Fit Freehold

(43000) 33000 28000 63000 145000

(43000) 33000 28000 63000 145000 0 0 =226000

Liabilities + Equity Creditors Capital

23000 203000

23000 0 0 0 0 203000 0

226000

Revenues - Expenses

Income Statement 30/6/2006Revenue

Sales 280,000Less: Cost of Sales (160,000)GROSS PROFIT 120,000

Less Expenses:Salary & Wages 37,000Loan interest 4,000Insurance 2,000Tel & Post 1,500Rents & rates 12,400Heat & Light 3,700Equip Repairs 1,600Dep - MV 4,500MV running costs 1,700Dep - Equip 3,200Acc & Audit 3,400Bad & DD Debts 800

(75,000)PROFIT BEFORE other income 45,000

Other Income:Royalties 1,700NET PROFIT 46,700

Cost $50,000Useful life 5 yearsResidual $20,000Dep required $30,000

Straight Line 6000 per yearwdv 6/30/2005 $44,000

6/30/2006 $38,000

Cost 50000 0.632456 0.1674476/30/2005 8372.326

WDV 41627.676/30/2006 6970.409 3.777706

WDV 34657.27 See Slide 21 Lecture 26/30/2007 5803.238

WDV 28854.036/30/2008 4831.506

WDV 24022.526/30/2009 4022.487

WDV 20000.03

ROSE LTDIncome Statement 31/3/2006

Sales 12114.00Cost of Sales -6284.00GROSS PROFIT 5830.00Labour Costs 2659.00Dep 699.00Bad debts 20.60Other 1003.00

4381.60Net profit before interest 1448.40Interest Expense 66.00Net Profit before tax 1382.40Tax Expense 414.72Net profit after tax 967.68Dividend declared 300.00Retained Profit for the year 667.68Retained Profit brought fwd 756.00Retained Profit carried fd 1423.68

Balance Sheet as at 31/3/2006

CURRENT ASSETSCash at bank 26.00Trade Debtors 1030.00Prov for DD. -20.60

1009.40Inventory 1581.00Total Current Assets 2616.40NON CURRENT ASSETS 2670.00

TOTAL ASSETS 5286.40

CURRENT LIABILITIESBank Overdraft 296.00Tax payable 414.72Dividend payable 300.00Trade Creditors 1134.00Other creditors 418.00

2562.72NON CURRENT LIABILITIESSecured Loan 300.00TOTAL LIABILITIES 2862.72NET ASSETS 2423.68

SHAREHOLDER EQUITYShare capital 1000.00Retained Profits 1423.68TOTAL LIABILITIES AND SHAREHOLDER EQUITY 2423.68

Assets = Liabilities +Bank Debtors Inv NCA Acc Dep Overdraft Tax

26 996 1583 2728 296 434

26 996 1583 2728 0 = 296 434

5333

Equity +Div Pay Creditors Other Cred Sec Loan Capital Ret Profit

300 1118 417 300 1000 756 12080

(6282)

(2658)

(625)

(1003)

(66)

(434)

(300)

300 1118 417 0 300 1000 756 712

5333

Revenues - Expenses

sales

Cogs

wages

Dep

Other Exp

Interest

Tax

Dividend

Revenues - Expenses

Credit sales not paid by debtors therefore profit is more than cash received.Creditors paid balnces owing plus all purchases, so the cash flow out of the bank is more.Expenses have been prepaid Accrued Income recognised but no cash received in the bank.

Is the daily operations of the business generating net inflows?Are we collecting money from our debtors in a timely manner?Are we paying interest on loans?Are we investing surplus funds?Did we make a profit (ie did we pay income tax)Have purchased NCA or dispossd of them? Are we upgrading them?How did we finance the company? Extra loans? Share Issues?Did Shareholders withdraw funds from the business?Did we pay a dividend? How was this financed?How liquid is the business?Financially stable?

Effects of Balance Sheet account year end balance differences

1

2 Increase in Inventory = more purchases (COGS)Decrease in Inventory = less purchases (COGS)

3 Increase in Accounts Payable = less cash paid Decrease in Accounts payable = more cash paid

4 Increase in Prepaid Expenses = more cash paidDecrease in Prepaid Expenses = less cash paid

Increase in Accrued Expenses = less cash paidDecrease in Accrued Expenses = more cash paid

5 Increase in Prepaid Income = more cash inDecrease in Prepaid Income = less cash in

Increase in Accrued Income = less cash inDecrease in Accrued Income = more cash in

6 Increase in Tax payable = less cash paidDecease in Tax payable = more cash paid

7 Increase in Non current Assets = more cash paid

8 Increase in Non Current Liabilities = more cash inDecrease in Non Current Liabilities - less cash in

Increase in Accounts Receivable (debtors) = less cash inDecrease in Accounts Receivable (debtors) = more cash in

2006 2007

ROA 17.46% 24.35%

NPM 11.67% 16.00%

GPM 40.00% 44.00%

AT 384.77 363.54 days

AV ITP 95.31 63.87 days

DD 44.10 29.20 days

INT COV 2.8 5.333333 times

Personal Service is A Because GP is erroded by other expenses (Wages)

Buis ALow turnover high quality ROA ROEService, Customer satisfaction etc Ddays Cdays

Assets =

0 0 0 0 0 0 0 =0

Liabilities + Equity

0 0 0 0 0 0 0

0

Revenues - Expenses