Essays on Accountancy Assignment

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TOTAL ASSETS……………………………………………………………………………………………………………………. .1,074,875LIABILITIES AND CAPITALDR CRCURRENT LIABILITIESBank overdraft………………………………………………………………………………. 430Trade Payables………………………………………………………………………………. 345Expense Payable (Electricity)…………………………………………………………3,000TOTAL CURRENT LIABILITIES…………………………………………………………………………………………………………. 3775LONG TERM LIABILITIES Tax liability………………………………………………………………………………………………………500,0000TOTAL LONG TERM LIABILITIES……………………………………………………………………………………………………. .500,000 TOTAL LIABILITIES……………………………………………………………………………………………………………. 503,775 CAPITAL (Total assets-liabilities)+ ordinary shares= 1,074,875-503775+ 1200=572,300ordinary shares……………………………………………………………………………………………………1200 Total Capital……………………………………………………………………………………………………. 572,300 TOTAL LIABILITIES AND CAPITAL……………………………………………………………………………………………£572,300SYSTEMS INTERGATED PLC INCOME STATEMENT AS AT 31ST DECEMBER 2010REVENUES £000Sales. .……………………………………………………………………………………. £ 11,178COST OF GOODSBeginning Inventory…………………………………………£850Purchases………………………………………………………. £7625 8,475,000Ending Inventory………………………………………935,000Cost of Good sold…………………………………………………………………………………. 7540Gross Profit…………………………………………………………………………………………. .3638EXPENSESAdministrative salaries ……………………………………. .620 Van drivers’ wages………………………………………400 Rent, rates and Insurance………………………………. ..219 Telephone expenses……………………………………. ..210 Advertising ………………………………………………175 Debenture interest paid……………………………………35 Heat and Light……………………………………………213 Bank overdraft interest……………………………. . ……. .35 Audit fees…………………………………………………. .91TOTAL EXPENSES………………………………………………………………………1998NET OPERATING INCOME ……………………………………………………………. 1640Other Income …………………………………………………………………………………. .Net income………………………………………………………………………… £ 1640Q. 2 Comments on the company’s performance in terms of Profitability, liquidity and efficiency In order to analyze the financial performance of Systems Integrated Plc in relation to the industry it will be necessary to analyze the gien financial ratios of the year 2009 and 2010.In accounting financial ratios are usually perceived as useful indicators of a firm’s performance as well as its financial situation.

To gauge the performance of Systems Integrated Plc in terms of profitability, liquidity and efficiency three financial ratios will be used thus profitability ratio, liquidity and efficiency ratios (Bull, 2007,pp. 67-70). Profitability Profitability ratios show the success of firm in generating profits.

Profitability ratios offer several different measures of the success of the firm at generating profits. Profitability ratios therefore measures how well a company is performing through the analysis of the profits earned relative to the sales, total assets and net worth(Tamari, 2007,pp. 89-95). From the financial ratios given it indicates that the operating profit sales margin for the company decreased from 19% in the year 2009 to 16% in the year 2010. The decrease between the years 2009 to 2010 by 3% indicates that the company’s sales profits for the year 2010 have reduced drastically a clear indication that the company is not in a good financial position compared to the previous year as well as not making adequate sales revenues on its product sales.

The drastic reduction could be associated with increase in the number of competitors in the industry as well as other factors such as inflation, price reduction among others. According to the company’s gross profit percentage it shows instability in the company’s profits (Tamari, 2007,pp. 89-95).

The profit margin in the year 2009 was 42% and 40% in the year 2010.The tremendous drop in profits between the years 2009 and 2010 by 2%indicates that the company is not generating much and heavy profits as compared to the previous year. The reduction in gross profit percentage is a clear indication that the company’s resources are reducing hence it has limited resources compared to the previous year (Tamari, 2007,pp. 89-95). Despite the mere fact that the company experienced a drop in its gross profit percentage by 2% the gross profit percentage for the company is still high a clear indication that the company has enough financial resources to pay for research, product development, and other costs associated with running and growing business. Efficiency In order to analyze and comment on the performance of Systems Integrated Plc in terms of efficiency it will be necessary to analyze the stated company’s efficiency ratios.

Efficiency ratios are usually used to analyze how well a company uses its assets internally, how well it manages its liabilities, how effectively the firm is paying suppliers and whether the business is overtrading or under trading on its equity(Bull, 2007,pp. 67-70).

In most cases therefore efficiency ratios are usually used to calculate the turnover of receivables, the repayment of liabilities, the quantity and usage of equity and the general use of inventory and machinery. From the financial ratios of Systems Integrated Plc, the Return on capital employed dropped from 35% to 32% in the year 2010.Return on capital employed is ratio used to measure the returns that a company is realizing from its capital. The resulting ratio usually represents the efficiency with which capital is being utilized in revenues (Bull, 2007, pp. 67-70).

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