MGT100-Introduction to Accounting Report Writing – Accounting Assignment Help

Assignment Task

Task

Background information:

You are the accountant employed by Sally Smith, the owner of the company Smith’s Clothing Limited
located in Arrowtown. It is a privately-owned New Zealand company that manufactures and distributes
high quality fashion clothing that would sell at a premium. Last year, she experimented with a new
business strategy that focused on two things:

1. Lowering manufacturing costs by investing in robotic machinery and using lower quality materials, and

2. Increasing sales volume by increasing the advertising budget.

It has warehouses in Wellington and Christchurch. It has a year-end of 31 December.

The industry has been in a favourable cycle the past few years and that trend is continuing in the current year. Industry profits are reasonably favourable, and there are no competitive or other apparent threats on the horizon, except for the rising New Zealand dollar. Smith’s Clothing Limited started exporting its clothing to Japan at the beginning of year as part of an international expansion plan. It is likely to require additional funding to finance this expansion and is contemplating a share issue sometime next year. All sales and purchases are made on credit. The issue of ordinary shares occurred on 31 December this year and the shares have a market value at the end of this year and last year of $6.50 and $3.50 respectively.
The balance sheets for the years ended 31 December for the past three years are included on the following pages, as well as the income statements for the years ended 31 December for the last and current year.

Your boss, Sally Smith, has asked you to prepare a report to the board of directors analysing the financial performance of Smith’s Clothing Limited, including a comparison with industry. Your report should include:

1. The financial ratios for the years ended 31 December for the current and previous year. The financial ratio formulae to use are on the following pages of this assessment. Round your answers to two decimal places and show your workings within the Excel spreadsheet template provided on Blackboard.

In addition to this please include the Ratio Worksheet showing; all your ratios, formulas, answers, and industry averages as part of your assignment Report, as an appendix, on Blackboard with your answers to questions (b) and (c) below.

2. Include in your report an interpretation of each of the financial ratios. They should include a comparison between the:

• Current year and previous year and
• Between the ratios for Smith’s Clothing Limited compared with industry ratios (refer to pages6 to 7 of this assessment for the relevant industry ratios).

3. Summarise:

•  ‘At least’ two financial strengths.
• Two weaknesses you have identified from your financial analysis (b) above, and a recommendation for each.

4. Report: collate the information from (a) to (c) above and put it into a professional business report for the board of directors by add the missing components. Refer to the list below for an outline of what your report needs to include.

5. Discuss two limitations of analysing financial information.

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