UNIVERSITY OF SOUTHERN QUEENSLAND | COURSE NO: ACC5502 | NAME: Accounting and Finance

The following information has been prepared for In Style Pty Ltd by their assistant accountant.

REQUIRED:

Prepare a report for the directors of In Style Pty. Ltd assessing its:

1. Profitability. (6 marks)

Check – discuss Net profit margin, gross profit margin, return on assets

1. Efficiency. (6 marks)
   Check – discuss inventory turnover and average debtor days

Part B (8 marks)

1. Assume a firm’s cash budget has identified a potential cash deficiency in three months time. Discuss two possible courses of action the firm could take to improve its cash position. (4 marks)

1. Discuss two limitations on the usefulness of financial accounting reports. (4 marks)

Question 2 (20 Marks)

Management Accounting

Joanne sells a single product, Fortune Crystals, at the local markets and over the internet. Estimated data relating to 2013 is:

Annual sales 2500 crystals

Selling price per crystal $30

Purchase price per crystal $8

Annual fixed marketing costs $2000

Variable marketing costs per crystal $3

Annual fixed administration costs $9500

Finance

Sutton Pty Ltd is considering an investment project with an initial outlay of $110 000. Listed below are the estimated cash flows relevant to the project. The cash flows are equal to net profit before deducting depreciation. Sutton Pty Ltd’s cost of capital is 14%. Depreciation is calculated on a straight-line basis. The project has a salvage value of $10 000 at the end of its useful life of four years.