Shaver Shop - Financial Statements - Manual Calculation and Analysis of Specific Ratios - Business Report Writing Assessment Answer

Assessment Task:

Shaver Shop Business Report Writing Assessment Answer

Background
Shaver Shop is a company who has had an eventful few years during the last few years of operations.

Requirements

• Based on your analysis of relevant information relating to Shaver Shop Group Limited, you are required to prepare a business report (see recommended structure detailed below) with a focus on the profitability, operating efficiency, liquidity, gearing of the company. The profitability and efficiency of the company should be analysed using the required ratios. Firms are accountable for generating profit with the assets employed. In addition, the firm must pay its debts as and when they fall due, therefore you are required to assess the liquidity and gearing of the business using the appropriate ratios. Use the data from the financial statements in the annual reports to calculate the ratios.

• Your report should cover a 2-year period for the years ending July2017 to 2018, and should be sufficiently broad in scope to demonstrate your understanding of findings following the analysis.

Company and industry background

Brief profile Shaver Shop GroupLimited – Its history, financial highlights, and other relevant company details and summarise the nature and current state of the industry in which it operates. This section of work will help contextualise the report in terms of key company information and the industry (and wider) environment in which the
firm operates.

 History, should include: When and where it started operations, by who, major expansions and acquisitions from then to now; types of products/services it offers, significant business relationships; when listed on the stock exchange
 Industry; includes identifying which industry it operates in, an understanding of the state of the industry and identifying major competitors.

History, should include: When and where it started operations, by who, major expansions and acquisitions from then to now; types of products/services
it offers, significant business relationships; when listed on the stock exchange

 Industry; includes identifying which industry it operates in, an understanding of the state of the industry and identifying major competitors.
The minimum ratios to be manually calculated for each of the 2 years are:

Profitability o return on shareholders’ equity o return on total assets o net profit margin
 Efficiency o inventory turnover

•  settlement period for debtors/accounts receivable 
•  settlement period for creditors/accounts payable o asset turnover
•  Liquidity o current ratio o cash flow from operations
• Financial gearing o gearing ratio
• Terminology in Shaver Shop Group Limited Group’s Financial Statements

1 a. Profit or Loss Statement use Consolidated Statement of Comprehensive Income

b. Balance Sheet use Consolidated Statement of Financial Position

c. Accounts Receivable use Trade and other receivables

d. Accounts Payable use Trade and other payables

e. Interest Expense use Finance Costs

f. Cost of goods sold use Cost of goods sold

2 Assume that 10% of sales are credit sales.

3. Assume 100% of Inventory (stock) purchases are on credit. As the purchases figure is not available you will need to calculate it. (HINT: Use your COGS formula)

4. To calculate the gearing ratio you should use the following formula:

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