HND商务会计高级outcome 3 4 5报告答案

Index page

Index page………………………………………..…. Introduction…………………………………………. Background………………………………………..… Findings

Section 1………………………………………… Section 2………………………………………… Section 3………………………………………… Conclusion………………………………………….. Reference…………………………………………….

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Introduction

Background

SSP plc is a company operating in the food manufacturing industry. It is engaged in food processing, supplying all the main supermarket chains with first class process meat products. During the last few years the company has been difficult because of the BSE and Foot and Mouth disease made a declining demand for meat product. The bad outstanding achievement stopped in 2004 and a partial rebound in the market produced an increase in turnover by nearly 15%. It is expected that this rebound in the market will gather momentum over the coming year and the SSP plc is planning to take even greater strides forward by opening a new processing plant in Glasgow.

As requested in the chief executive’s memo of 30 December, here is my report summarising and analysising the financial position of the SSP plc for the year 2003 and 2004.

Outline

The main body of the report will evaluate five parts:

Part 1--- Analyze the users of financial information and the purpose of using. Part 2--- State of financial source and categorize with their characteristics. Part 3---Explain the cash flow statement of SSP plc.

Analyze the recent financial performance and position of the SSP plc.

(Including my recommendations about how to improvement of business performance)

Findings

Section 1. Users of financial accounts.

Users of financial statements are a group of people or organizations who use the information to make evaluations and decisions. Users of financial information can be divided into two categories: internal and external users.

Now, I will use a table to show you the users’ purpose and sources of information they use to get the statements.

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Section 2. Source of finances

To run a business, organizations require finance for different proposes and for varying lengths of time. In the finance, we divide sources of capital into two categories: equity capital and loan capital. Equity capital is the finance provided by the owner and there is no interest to pay. Loan capital refers to money that is borrowed from a source outside the business. The interest of loan capital must be paid. Sources of finances could be clarified into short, medium and long term. The short-term refers to finance that are borrowed for a period of no more than one year. The medium-term refers to funds that are borrowed for a period of between two and ten years. Long-term refers to funds that are borrowed for a period of more than ten years.

In the case study, the source of finances of SSP plc is: trade creditors, tax, bank overdraft, debentures, ordinary share capital and the retained profits from last account period.

Short-term sources: 1. Trade creditors:

Trade creditors are produced when the purchase of raw materials or stock is delaying to pay, thus, there is more cash which would be used for other uses. There is also an interest free way of raising finance. However, the credit could lead to poor relations with suppliers and the customers may forfeit discounts.

The credit is ￡544,000 in 2003 and it decreased to ￡405,000 in 2004. The percentage of decrease is 25.56%. The decrease of credit infers that SSP plc has a good financial situation that it has a strong ability to pay credits back to suppliers. This could improve the relationship with suppliers. 2. Bank overdraft:

Bank account holders can prearrange with the bank to draw cheques to a greater value than the actual balance in the account. Interest should be paid by customers and bank charges will apply where an overdraft limit has been exceeded. Bank overdraft is flexible and cheap. It has a low cost. Some small bank overdraft even has a free of charge.

SSP plc had no overdraft but the number increased to ￡86,000 in 2004. The increase shows that the company borrowed money from bank for its expansion in Glasgow.

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Long-term sources: 1. Debentures:

Debentures are loans make to companies that carry a fixed rate of interest. The company’s fixed assets normally secure debentures. Debentures have a fixed time period or an open time period. The shareholders are not debenture holders. A debenture interest is paid as an expense not an appropriation of profit.

SSP plc has a fixed debenture (￡1,560,000) in the year of 2003 and 2004. It tells us the company’s fixed assets are steady. 2. Ordinary shares:

Ordinary shareholders receiving pay-outs from company after preference shareholders are paid. Ordinary share dividends are not fixed and subject to company’s periodical performances and decisions of management in paying dividend.

In SSP Company, the ordinary share capital is ￡1,950,000 in both 2003 and 2004. It infers that the company has a steady operation situation. 3. Retained Profits

The retained profit is the finance brought from the last financial period. It is not fixed and may be a negative number. It presents operational situation of last period.

The retained profits decreased from ￡505,000 to ￡420,000. The percentage change of decrease is 16.83%. The lower ratio shows us the company had made fewer profits in 2003 then it was in 2002.

Section 3. Ratio Analysis

1. Major inflows is Net cash flow operating activates of ￡1,345,000.

Major outflow is Payments to acquire fixed assets, which takes ￡984,000. 2. Ratio Analysis

Profitability Ratios:

? Gross Profit Percentage=Gross profit/Turnover x 100%

2003: GPP=￡7,000,000/￡11,674,000 x 100%=59.96% 2004: GPP=￡8,037,000/￡13,382,000 x 100%=60.06% Trend: Increase

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Analysis: The increase of ratio is a good sign. The positive trend can be an indication that stock control of meat product has improved, demand for the meat product has increased after the diseases, or purchasing policies have improved. The managers should keep the good trend and go on develop it, such as improving marketing strategy, setting better pricing policy, or improving stock control.

? Net Profit Percentage=Net Profit before Taxation/ Turnover x 100%

2003: NPP=￡1,182,000/￡11,674,000 x 100%=10.13% 2004: NPP=￡901,000/￡13,382,000 x 100%=6.73% Trend: Decrease

Analysis: The decrease of the ratio is a bad sign that it indicates a low profit of the company. From the P&L Account of the SSP plc, we know that although the gross profit increased, the operation cost is much higher in 2004; it leads to a decrease in net profit. So the managers should think about how to decrease our operation cost to help our company earn more profit.

Liquidity Ratios:

? Current Ratio=Total Current Assets/Total Current Liabilities

2003: CR=￡1,195,000/￡767,000=1.56 2004: CR=￡1,248,000/￡701,000=1.78 Trend: Increase

Analysis: the increase of ratio is a good sign. Generally speaking a healthy current ratio is at least 2:1. The 1.56 and 1.78 indicate the company is a little bit over trading and have difficulty in meeting its short-term debts. The main reason for the increase is the increase in the total current assets and decrease in the total current liabilities. I suggest that the company may keep more profit for the short-term debts.

? The Acid Test Ratio=Liquid Assets/Current Liabilities

2003: (￡1,195,000-￡608,000)/￡767,000=0.77 2004: (￡1,248,000-￡796,000)/￡701,000=0.64 Trend: Decrease

Analysis: The decrease is a bad sign. The ratio should be 1:1. But the ratio in both of 2003 and

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