Accounting And Finance For Business - Joyce Corp Ltd - Case Study Assessment Answer

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Question : Accounting Case Study

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Accounting Case Study Assignment

Assignment task

Joyce Corp Ltd

Case Study 1

Nick Scali Ltd

Case Study 2

Nick Scali Ltd

Case Study 3

Nick Scali Ltd

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Solution:

Case 1Nick Scali Ltd

Nick Scali Ltd

Nick Scali Ltd

The marker value of the organization in descending order is as follows (‘000):

  • Super Retail Group Ltd ($10.28 x 197.03 = $2025.47)
  • Vita Group Ltd ($5.31 x 151.35 = $803.67)
  • Nick Scali Ltd ($5.93 x 81= $480.33)
  • Kathmandu Holdings Limited ($1.88 x 201.48 = $378.78)
  • Oroton Group Ltd ($2.32 x 40.88 = $94.84)

Case 2

Nick Scali Ltd

  • Holding Period Return from 1st January 2005 to 31st December 2015
  • NCK: Holding Period Return:
  • Formula: (Closing price – open price + dividends)/open price

Nick Scali Ltd

Kathmandu Holdings Limited

Kathmandu Holdings Limited

Joyce Corp Ltd

Joyce Corp Ltd

Super Retail Group Ltd

Super Retail Group Ltd

Case 3

Nick Scali Ltd

1. a. Growth of EPS for NCK over the five years to 30th June 2015

Basic EPS 2010: 13.9

Basic EPS 2015: 21.1

Growth of EPS

[(21.1/13.9)^1/5] – 1 = 8.71%

b. The Asset Turnover Ratio, Net Profit Margin, Net Debt to Equity Ratio, Leverage Ratio and Return on Equity for the company for both financial years

2009/10: AUD$’000

2014/15: AUD$’000

The Net Profit Margin = Net Profit/ Revenue x 100

2009/10: (11511/96365) x 100% = 11.95%

2014/15: (17408/155743) x 100% = 11.18%

Leverage Ratio = Average Assets/ Average Equity x 100

2009/10: {[(41075 + 32171)/2]/ [(21430 + 18424)/2]} x 100 = 183.79%

2014/15: {[(96337 + 80426)/2]/ [(46226 + 40130)/2]} x 100 = 204.69%

Return on Equity = Net Profit/ Average Equity x 100

2009/10: 11511/ [(21430 + 18424)/2] x 100% = 57.77%

2014/15: 17408/ [(46226 + 40130)/2] x 100% = 40.32%

Net Debt to Equity Ratio = Total Debt – Cash/ Equity x 100

2009/10: [(0 – 17312)/ 21430] x 100 = -80.73%

2014/15: [(12062 – 33680)/ 46226] x 100 = -46.77%

Asset Turnover Ratio = Revenue/ Average Assets

2009/10: 96365/ [(41075 + 32171)/ 2] = 2.63x

2014/15: 155743/ [(96337 + 80426)/ 2] =1.76x

2. For the purpose of purchasing plant and equipment if Nick had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: Increase

Equity: No change

2014/15:

Return on Equity = Net Profit/ Average Equity x 100

17408/ [(46226 + 40130)/2] x 100% = 40.32%

2014/15:

The Net Debt to Equity = Total Debt + 50000 – Cash/ Equity x 100

{[(12062 + 50000) – 33680]/ 46226} x 100 = 61.40%

For the purpose of purchasing plant and equipment if Nick had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: No change

Equity: Increase

2014/15

Return on Equity = [Net Profit/ (Average Equity + 50000)] x 100

17408/ {[(46226 + 40130)/2] + 50000} = 18.68%

2014/15

The Net Debt on Equity Ratio = [(Total Debt – Cash)/ (Equity + 50000)] x 100

[(12062 – 33680)/ (46226 + 50000)] x 100 = (22.46%)

Kathmandu Holdings Limited

 

1. a. Growth of EPS for KHL over the five years to 30th June 2015

Basic EPS in 2010: 0.3

Basic EPS in 2015: 10.1

Growth of EPS

[(10.1/0.3)^1/5] – 1 = 102.04%

b. The company KMD for both financial years

2009: NZ$’000

2010: NZ$’000

Leverage Ratio = Average Assets/ Average Equity x 100

2009/10: {[(319414 + 349385)/2]/ [(239127 + 132686)/2]} x 100 = 179.88%

2014/15: {[(430451 + 408297)/2]/ [(313314 + 302146)/2]} x 100 = 136.28%

Asset Turnover Ratio = Revenue/ Average Assets

2009/10: 245812/ [(319414 + 349385)/2] = 0.73x

2014/15: 409372/ [(430451 + 408297)/2] = 0.98x

The Net Profit Margin = Net Profit/ Revenue x 100

2009/10: (5292/245812) x 100 = 2.15%

2014/15: (33868/409372) x 100 = 8.27%

Return on Equity = Net Profit/ Average Equity x 100

2009/10: [5292/ (239127 + 132686)/2] x 100 = 2.85%

2014/15: [33868/ (313314 + 302146)/2] x 100 = 11.01%

Net Debt to Equity Ratio = Total Debt – Cash/ Equity x 100

2009/10: [(53965 – 4736)/ 239127] x 100 = 20.59%

2014/15: {[(39 + 70976) – 1700]/ 313314} x 100 = 22.12%

2. For the purpose of purchasing plant and equipment if KHL had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: Increase

Equity: No change

2014/15:

Return on Equity = Net Profit/ Average Equity x 100

[33868/ (313314 + 302146)/2] x 100 = 11.01%

2014/15:

The Net Debt to Equity = {[(Total Debt + 50000) – Cash]/ Equity} x 100

{[(39 + 70976 + 50000) – 1700]/ 313314} x 100 = 38.08%

1. For the purpose of purchasing plant and equipment if KHL had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: No change

Equity: Increase

2014/15

Return on Equity = [Net Profit/ (Average Equity + 50000)] x 100

[33868/ (313314 + 302146)/2 + 50000] = 9.47%

2014/15

The Net Debt on Equity Ratio = [(Total Debt – Cash)/ (Equity + 50000)] x 100

[(39 + 70976) – 1700)/ (313314 + 50000)] x 100 = 19.08%

Joyce Corp Ltd

1. Growth of EPS for JCL over the five years to 30th June 2015

Basic EPS 2010: -39.4

Basic EPS 2015: 16.2

EPS Growth

[(16.2/ (-39.4))^1/5] – 1 = -183.7%

b. The Asset Turnover Ratio, Net Profit Margin, Net Debt to Equity Ratio, Leverage Ratio and Return on Equity for the company for both financial years

2009/10: AUD$’000

2014/15: AUD$’000

The Net Profit Margin = Net Profit/ Revenue x 100

2009/10: (-8147/21990) x 100 = (37.05%)

2014/15: (5221/34737) x 100 = 15.03%

Leverage Ratio = Average Assets/ Average Equity x 100

2009/10: {[(44440 + 45407)/2]/ [(15691 + 24243)/2]} x 100 = 224.99%

2014/15: {[(45814 + 36618)/2]/ [(26450 + 22730)/2]} x 100 = 167.61%

Asset Turnover Ratio = Revenue/ Average Assets

2009/10: 21990/ [(44440 + 45407)/ 2] = 0.49x

2014/15: 34737/ [(45814 + 36618)/ 2] = 0.84x

Return on Equity = Net Profit/ Average Equity x 100

2009/10: {(-8147)/ [(15691 + 24243)/2]} x 100 = (40.78%)

2014/15: 5221/ [(26450 + 22730)/2] x 100 = 21.23%

Net Debt to Equity Ratio = Total Debt – Cash/ Equity x 100

2009/10: [(12602 + 286) – 4180)/ 15691] x 100 = 55.5%

2014/15: [(22 + 5300) – 5962)/ 26450] x 100 = (2.42%)

2. For the purpose of purchasing plant and equipment if JCL had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: Increase

Equity: No change

2014/15:

Return on Equity = Net Profit/ Average Equity x 100

5221/ [(26450 + 22730)/2] x 100% = 21.23%

2014/15:

The Net Debt to Equity = Total Debt + 50000 – Cash/ Equity x 100

{[(22 + 5300 + 50000) – 5962]/ 26450} x 100 = 186.62%

3. For the purpose of purchasing plant and equipment if JCL had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: No change

Equity: Increase

2014/15

Return on Equity = [Net Profit/ (Average Equity + 50000)] x 100

5221/ {[(26450 + 22730)/2] + 50000} = 6.99%

2014/15

The Net Debt on Equity Ratio = [(Total Debt – Cash)/ (Equity + 50000)] x 100

[(22 + 5300) – 5962]/ (26450 + 50000)] x 100 = (0.84%)

Super Retail Group Ltd

1. EPS growth of SRGL five years to 30th June 2015

Basic EPS 2010: 34

Basic EPS 2015: 49.4

EPS growth

[(49.4/34)^1/5] – 1 = 7.76%

b. The Net Profit Margin, Asset Turnover Ratio, Leverage Ratio, Net Debt to Equity Ratio and Return on Equity for the company for both financial years

2009/10: AUD’000

2014/15: AUD $m

Net Debt to Equity Ratio = Total Debt – Cash/ Equity x 100

2009/10: [(9008 + 100000) – 30220)/ 270557] x 100 = 29.12%

2014/15: [(389.8 + 2.2) – 13.1)/ 765.3] x 100 = 49.51%

Asset Turnover Ratio = Revenue/ Average Assets

2009/10: 938765/ [(522246 + 437771)/ 2] = 1.95x

2014/15: 2241.2/ [(557.7 + 555.4)/ 2] = 4.03x

Leverage Ratio = Average Assets/ Average Equity x 100

2009/10: {[(522246 + 437771)/2]/ [(270557 + 156354)/2]} x 100 = 224.88%

2014/15: {[(557.7 + 555.4)/2]/ [(765.3 + 760.4)/2]} x 100 = 72.96%

Return on Equity = Net Profit/ Average Equity x 100

2009/10: 37305/ [(270557 + 156354)/2]} x 100 = 17.48%

2014/15: 82.6/ [(765.3 + 760.4)/2] x 100 = 10.83%

The Net Profit Margin = Net Profit/ Revenue x 100

2009/10: (37305/938765) x 100 = 3.97%

2014/15: (82.6/2241.2) x 100 = 3.69%

2. For the purpose of purchasing plant and equipment if SRGL had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: Increase

Equity: No change

2014/15:

Return on Equity = Net Profit/ Average Equity x 100

2014/15: 82.6/ [(765.3 + 760.4)/2] x 100 = 10.83%

2014/15:

The Net Debt to Equity = Total Debt + 50 – Cash/ Equity x 100

{[(2.2 + 389.8 + 50) – 13.1]/ 765.3} x 100 = 56.04%

3. For the purpose of purchasing plant and equipment if SRGL had raised $50 million, ROE will not change. However the Debt to Equity ratio of the organization will undergo a change.

Assets: Increase

Liabilities: No change

Equity: Increase

2014/15

Return on Equity = [Net Profit/ (Average Equity + 50)] x 100

{82.6/ [(765.3 + 760.4)/2] + 50} x 100 = 10.16%

2014/15

The Net Debt on Equity Ratio = [(Total Debt – Cash)/ (Equity + 50)] x 100

[(2.2 + 389.8) – 13.1]/ (765.3 + 50)] x 100 = 46.47%

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