BA713 Financial Management

Tutorial 2
TUTORIAL EXERCISE

Umi Limited is a company that operates a general merchandise wholesale business at Honiara City. The
financial reports for the year 2017 and 2018 are as below:
Umi Limited
Income Statement for 2017 and 2018
  2018 2017
Net Sales 3,180,000.00 3,600,000.00
Cost of Goods Sold - -
Opening Inventory 250,000.00 280,000.00
+Net purchases 1,638,000.00 1,920,000.00
  1,888,000.00 2,200,000.00
-closing inventory 270,000.00 250,000.00
Cost of Goods Sold 1,618,000.00 1,950,000.00
Gross Profit (Loss) 1,562,000.00 1,650,000.00
  - -
Less Operating Expenses - -
Variable Overhead - -
Advertisement 30,000.00 36,000.00
Legal fees 30,000.00 36,000.00
Depreciation 126,000.00 152,000.00
Office Supplies 30,000.00 36,000.00
Communications 36,000.00 43,200.00
Store wages 178,000.00 158,000.00
Total Variable Overhead 430,000.00 461,200.00
Fixed Overhead - -
Office Salaries 266,000.00 259,200.00
Rent 216,000.00 288,000.00
Insurance 108,000.00 129,600.00
Utilities 72,000.00 61,400.00
Travel & Entertainment 90,000.00 78,000.00
Total Fixed overhead 752,000.00 816,200.00
Total Overhead 1,182,000.00 1,277,400.00
  - -
Net Profit (Loss) before tax 380,000.00 372,600.00
Income Tax 114,000.00 111,780.00
Net Profit (Loss) after tax 266,000.00 260,820.00

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Umi Limited
BALANCE SHEET AS AT END OF YEAR

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ASSETS 2018 2017
CURRENT ASSETS      
282,500. 399,600.
Cash 00   00  
263,500. 310,000.
Net Accounts Receivable 00   00  
270,000. 250,000.
Inventory 00   00  
82,500. 75,000.
Prepaid Expenses 00   00  
55,000. 50,000.
Other current assets 00   00  
953,500. 1,084,600.0
Total Current Assets   00   0
         
FIXED ASSETS        
2,229,535.0 2,026,850.0
Total Fixed Assets 0   0  
446,000. 320,000.
Less Accum Depreciation 00   00  
1,783,535. 1,706,850.0
Net Fixed Assets   00   0
2,737,035. 2,791,450.0
TOTAL ASSETS   00   0
LESS LIABILITIES        
CURRENT LIABILITIES        
345,000. 375,000.
Accounts payable 00   00  
121,000. 110,000.
Accrued expenses 00   00  
88,000. 80,000.
Short-term debt 00   00  
554,000. 565,000.
Total Current Liabilities   00   00
         
Long Term Liabilities        
846,035. 966,000.
Mortgages 00   00  
303,300. 252,750.
Other Long term Liabilities 00   00  
1,149,335. 1,218,750.0
Total Long Term Liabilities   00   0
1,703,335. 1,783,750.0
TOTAL LIABILITIES - 00   0
       
1,033,700. 1,007,700.0
NET ASSETS - 00 0
Represented by:      

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 OWNERS EQUITY      
Share Capital        
500,000. 500,000.
500,000 ordinary shares, fully paid 00   00  
200,000. 700,000. 200,000. 700,000.
100,000 preference shares fully paid (20 % p.a.) 00 00 00 00
Reserves        
50,000. 50,000.
General reserves 00   00  
60,000. 110,000. 60,000. 110,000.
Asset revaluation reserve 00 00 00 00
223,700. 197,700.
Retained Profits   00   00
1,033,700. 1,007,700.0
TOTAL NET WORTH   00   0

Required:
(a) Do an intra-company analysis of Umi Limited over the 2 years
(b) Assess and comment on the liquidity of Umi Limited
(c) Assess and comment on the solvency of Umi Limited
(d) Assess and comment on the Profitability of Umi Limited