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Postgraduate Diploma in Arts in Financial Management
Interpretation of Financial Statements
Student no. –
Title – Financial Analysis of Lockdown Ltd.
Submission Date – 29/03/2021
Word Count –
Lecturer – Brian Kelly
Financial Statement Analysis
Students are to write a financial analysis report for Lockdown Ltd.
Word count – 2,500 to 3,000 words.
Due date – 29th March 2021
Lockdown Ltd is a chain of off-licence’s selling alcohol beverages and has share ownership with two brothers Paddy & John McGuiness. The company was established in 2010 by the brothers, they are the only shareholders owning 50% each.
The two brothers set up the company after being let go from their positions as bar manager and hotel duty manager respectively in late 2009. The brothers felt that at that time, off-licence was the way forward during the downturn in the economy.
Lockdown Ltd started off with just the two stores with each brother running one each. In 2014, an opportunity to purchase six more stores arose and with the first two stores being profitable the brothers jumped at the chance to expand. A manager was employed at each of the extra stores.
On January 1st 2019 Lockdown Ltd purchased two more stores but with the company expanding rapidly the brothers were no longer able to work within the off-licences themselves and each of the 10 stores employed a full-time manager.
Along with each of the 10 stores employing a full time manager, one other full time and two part time staff are employed in each store.
During 2019 the brothers started supplying wholesale to the pubs and restaurants in the local area, giving generous credit terms.
The brothers are also thinking of investing in delivery Vans for each store in 2020, they want to know from your expertise would this be a good move going forward as a business.
The brothers Paddy & John McGuiness are pleased with the way business is going but neither are up to date with accounting or good with figures. The brothers have asked for your expertise in analysing their accounts and are looking for a report on Lockdown Ltd business health over the following categories:
• About Company & Accounts (5 marks)
• Profitability (5 marks)
• Liquidity (5 marks)
• Efficiency (5 marks)
• Gearing (5 marks)
• Investor (5 marks)
• Comments for each section above (30 marks – 5 sections * 6 marks each)
• Advice for company (20 marks)
• Share Price advise (5 marks)
• Delivery Vans Yes/No (5 marks)
• Potential Threats / Future plans (5 marks)
• Conclusion (5 marks)
The brothers are thinking of listing the company on the stock exchange & are looking for advice on the value Lockdown Ltd should have on a single share.
A company in the same industry is listed on the stock exchange with a share price of €3.30 & a P/E ratio of 12.
Paddy & John are looking for your expertise in analysing the accounts for the year ending 31/12/2018 & 31/12/2019. Given below:
? Income Statement
? Statement of Financial Position (SOFP)
Income Statement of Lockdown Ltd
Revenue 4,850 4,200
Cost of Sales 3,200 2,600
Gross Profit 1,650 1,600
Distribution costs -400 -300
Administrative expenses -400 -300
Finance costs -50 0
Profit before taxation 800 1,000
Tax expense -75 -100
PAT 725 900
Dividend -600 -300
Profit for the Year 125 600
Statement of Financial Position for Lockdown Ltd
Property, plant & Equipment 11,300 9,500
Goodwill 200 0
Inventories 650 180
Trade Receivables 450 60
Bank or Cash 0 500
Total Assets 12,600 10,240
Equity and liabilities
Issued equity share capital (€2) 6,500 6,300
Retained Earning 4,125 3,400
Long-term loan 1,000 0
Trade payables 400 440
Current tax 75 100
Bank overdraft 500 0
Total equity and liabilities 12,600 10,240
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