Nautical Co

In: Business and Management

Submitted By karaxi
Words 360
Pages 2
Question #1

The Nautical Co. Ltd. expects sales of $2.4 mill this year and the same amount the following year. All sales are on credit and are spread evenly throughout the year. On the basis of the following information, prepare a forecast income statement and balance sheet for year ended December 31st, 2017.

* Cash : Minimum of 4 percent of annual sales * Accounts Receivable : 60 day average collection based on annual sales. * Inventories : Turnover of eight times a year. * Net Fixed Assets : $500,000 now. Capital expenditure equal to depreciation. * Accounts Payable : One month’s purchases. * Accrued expenses : 3 percent of sales. * Bank borrowing : $50,000 now. Can borrow as much as $250,000. * Long Term Debt : $300,000 now; payable balance $75,000 at year end. * Common Stock : $100,000. No addition planned. * Retained Earnings : $500,000 now ( the opening balance ). * Net profit margin : 8% of sales * Dividends : None * Cost of Goods Sold : 60% of sales. * Purchases : 50% of cost of goods sold. * Income Taxes : 50% of before tax profits.

Question 2.

Answer the following question.

Although ratios offer a quick and useful method of analysing the position and performance of a business, they are not without their problems and limitations.
Outline what you consider to be some of the important limitations of ratio analysis.

Question 3

| | | | | | | | BALANCE SHEET | | | | | INCOME STATEMENT | | | | $'000 | | | | $'000 | Net Fixed Assets | | 3,320 | | Net Sales (all credit) | 12,680 | | | | | | Cost of Sales | 8,930 | Cash | | | 400 | | | |…...

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