Accounting and Finance the Budget Term Paper

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2009= (9,172,000 x365) / 63,729,000

2009= 52.53

2010= (9,211,000 x 365) / 63,398,000

2010=53.03

Trade Receivables Collection Period

The ratio reveals how long a company is able to collect the funds from credit customers owed the business. However, the financial statements of Jameson plc for 2009 and 2010 revealed that the company does not generate revenue from credit sales. Thus, the company credit sales revenue for 2009 and 2010 fiscal years are £0 for the two years.

Formula:

Trade Receivables Collection Period: Trade Receivables/Credit Sales Revenue x 365

2009=18,580,000/0 x365

2009 =0

2010=20,243,000/0 x 365

2010=0

Trade payables payment period

The trade payables payment period measures how long a business takes to settle suppliers supplying goods and services on credit.

The formula to calculate trade payables payment period is as follows:

Trade payables payment period =Trade Payables / Credit Purchase x 365

There is no information in the balance sheet and the income statement of Jameson plc that the company made a credit purchase in 2009 and 2010 fiscal year.

Dividend yield

Dividend yield reveals the cash returns attributed to a share and to its current market value. The dividend yield assists investors to assess the cash return on investment.

Formula:

Dividend Yield: Annual Dividend per Share / Price per Share

2009 = 26.25/850

2009=3.09%

2010=29.25/958

2010=3.05%

Price/earnings ratio

P/E Ratio relates the market value of a share and relates to its earning per share.

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It is calculated as:

P/E Ratio= Market Value per Share / Earning per share

2009= 850/26.25

2009=32.38

2010=958/29.25

2010=32.75

Summary of Ratio of Jameson plc is revealed in Table 1.

Table 1: Ratio Analysis of Jameson Plc

Ratio

2009

2010

Current Ratio

2.63

2.92

Acid Test

2.2

2.53

ROCE

18.75%

20.01%

Gross Profit Margin

49.9%

50.7%

Operating Profit Margin

12.28%

12.74%

Inventory Holding Period

52.53

53.03

Trade receivables collection period

0

0

Trade payables payment period

Nil

Nil

Dividend Yield

3.09%

3.05%

Price/earnings ratio

32.38

32.75

Answer to Question 3

Portable bikes -- 2 - go

Costs

Fixed costs

£50,000 per annum

To produce between 1,000 and 3,000 bikes

Variable cost per portable bicycle

£40 per unit

a.

Sales

3,000 x £76.66

230,000

Fixed Costs

£50,000

Variable Costs

40 x 3,000

£120, 000

Total Costs

£170,000

Profit

230,000-170,00

£60,000

To make the profit of £60,000 from the demand of 3,000, the company will need to charge £67.66 as the selling price per portable bike.

B. To charge £80 per bike, the break even number will be 1250 units.

C.

Sales

2000 x £115

230,000

Fixed Costs

£50,000

Variable Costs

60 x 2,000

£120, 000

Total Costs

£170,000

Profit

230,000-170,00

£60,000

The minimum selling price will be £115 per regular bike. The company should charge £115 to maintain its £60,000 profits.

D.

Portable bikes -- 2.....

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Accounting and Finance the Budget Term Paper

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