FINANCIAL ANALYSIS

Financial analysis

Financial Analysis

Task A

(a)Consolidated statement

Solution:

Minority Interest:

£' 000

£' 000

Ordinary share capital

2000

Retained earnings (pre-acquisition)

3600

5600

Goodwill:

Cost of investment

43800

Ordinary share capital

10000

Retained earnings(pre-acquisition)

18000

Profit

5333

33333

Group share (80%)

26666.4

Goodwill

17133.6

Retained earnings:

Ridge

14000

Share of Quaye R.E (Post acquisition)

-8000

6000

Goodwill written off on consolidation

-17134

-11134

Ridge

Statement of Financial Position for the year ended on 31 March, 2012

Non- Current Assets

Property, Plant and Equipment

69300

Investment- Quaye

24000

Shape at cost

6600

Loan notes

2500

Other equity

2800

105200

Current Assets

Inventory

24300

Trade Receivables

12500

Goodwill

-11134

Bank

1500

27166

Total Assets

132366

Equity and Liabilities

Equity

Equity share of £1 each

25000

Share premium

17600

Retained earning

14000

56600

Non-Current Liabilities

11% loan notes

16000

Deferred Tax

5500

Current liabilities

16200

Minority Interest

5600

43300

Total Equity and Liabilities

99900

Workings: £ooo

Ordinary share capital

0.2*10000=2000

Retained earnings (pre-acquisition)

0.2*18000=3600

Cost of investment

8800+35000=43800

Profit

16000/1.5=10667+5333

Retained earning

(8000-18000)80%=-8000

Property, Plant and Equipment

38100+28500+3000=69600

Shape at cost

6000+600=6600

Other equity

2000+800=2800

Inventory

13900+10400=24300

Trade R/A

11400+5500-4400=12500

Bank

900+600=1500

Current Liabilities

9500+5000-1700=12800

Deferred Tax

4500+1000=5500

(b) Advantages of IFRS

A business that is adopting the International financial reporting standard an present the financial statements on the same basis as its foreign companies which can make the difference easily. In addition the organization that require international financial reporting system will be able to use the standard language set in the accounting standard and will be able to understand the financial statements. Companies which are subsidiary of foreign companies need to adopt the international financial reporting system. If an organization or a company have the foreign investors then there is need to adopt the international financial reporting system because IFRS is understandable worldwide. Organizations that need to raise their capital abroad neeed to adopt the international financial reporting system. Accounting Standards Board (ASB) stated that IFRS is pre-requisite for companies including SME's. As Abogaye & Co is already considering adoption of IFRS so it will be a plus point for the company (Loredana, 1879).

With the same accounting standard globally will provide a better chance in order to compare the firm globally across the whole globe. The advantage of using the international financial reporting system is that it provides an ability in order to compare the financial statements or the process of accounting across the international or the global competitors. When the accounting reporting standard is identical across the globe than the competitors will be able to compare the benchmark since the financial statements are reported in the same accounting standards.

Task B

(b) Cash flow Statement

Dansoman Limited

Cash Flow Statement

For the Year Ended on September 30, 2012

2013

Cash Flows from Operating Activities

£'000

Net Income

2,900.00

Add Expenses Not Requiring Cash:

Depreciation

11,000.00

Other Adjustments:

Add Reduction in Accounts Receivable

200.00

Add Increase in Deferred Taxes

400.00

Add Increase in Accounts Payable

500.00

Subtract Decrease in Taxation

-200.00

Subtract Increase in Inventory

-3,000.00

Dividend received

150.00

Loss on Disposal

1,000.00

Net Cash (Operating Activities)

12,950.00

Cash Flows from Investing Activities

Decrease in Equity Investments

2,500.00

Purchase of new Plant

-8,300.00

Profit on sale of investment

400.00

Increase in fair value

50.00

Decrease in valuation of Property, Plant and Equipment

-9,500.00



New Finance Lease additions

6,700.00

Proceeds from sale of property

8100.00

Increase in investment income

-400.00

Net Cash used for Investing Activities

-450.00

Cash Flows from Financing Activities

Issue bonus Shares (2000+1200)

3,200.00

Increase in Bank OD

2,900.00

Increase in Finance Lease obligation

100.00

Net Cash from Financing Activities

6,200.00

Net increase/(decrease) in cash

2,100.00

Cash, beginning of year

1,400.00

Cash, end of year

13,900.00

(b) UK Cash Flow Statement

Although FRS 1 'Cash flow statements' has similar requirements to IAS 7 and the process of preparing cash flow statements is the same under both there are two areas of significant difference are:

FRS ...