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I have a question regards to f7 paper dec 07 the question is about harbin has bought over whole net asset of fatima and when we wanted to calculate ratio.when we want to calculate ratio for without including fatima. does it will affect inventory holding period, trade Payable and receivable ratio? how to calculate without include fatima roce ratio?
Fatimah Income statement
Revenue 70,000
Cost of Sales (40,000)
Gross Profit 30,000
Operating expenses (8000)
PBT 22,000
Income statement for the year ended 2007 and 2006
2007 2006
Revenue 250,000 180,000
Cost of sales (200,000) (150,000)
Gross profit 50,000 30,000
Operating expenses (26,000) (22,000)
Finance cost (8000) nil
PBT 16000 8000
Tax (4000) (2000)
Profit for the year 12,000 6000Financial Position 2007 2006
NCA
PPE 210,000 90,000
Goodwill 10,000 –
220,000 90,000
CA
Inventory 25,000 15,000
Trade receivable 13,000 8000
Bank – 14,000
38,000 37,000Total assets 258,000 127,000
Equity and liabilities
Equity share 100,000 100,000
Retained earnings 14,000 12,000NCL
Loan note 8% 100,000 nilCL
Bank overdraft 17,000 nil
Trade payable 23,000 13,000
Current tax payable 4000 2000
44000 15000
Total equity and liabilties 258,000 127,000“Fatimah Income statement
Revenue 70,000
Cost of Sales (40,000)
Gross Profit 30,000
Operating expenses (8000)
PBT 22,000”See that last line “PBT 22,000”
Well, everything after that is the separate financial statements for Harbin and for Fatima respectively
So to get the ratios for Harbin without Fatima, just work with the Harbin column of figures
Does that do it for you?
but the question did not given the financial position of the fatima
and the financial statement given for the harbin is already the consolidated financial statements which means already include the fatima so does it need to do a column without include fatima so that only can compare with 2006 ratio like with like? because the question also given the following ratio have been calculated for harbin for the year ended 30 september 2006Return on year-end capital employed 7.1%
Net asset (equal to capital employed) turnover 1.6
Net profit (before tax) margin 4.4%
Current ratio 2.5
Closing inventory holding period (in days) 37
Trade receivable collection period (in days) 16
Trade payable payment period (based on cost of sales) in days 32
Gearing (debt over debt plus equity) nil
The date of acquistion for fatimah is 1 october 2006. Harbin purchased the whole of net assets of fatima for $100 million.“Fatimah Income statement for the year ended 30 september 2007
Revenue 70,000
Cost of Sales (40,000)
Gross Profit 30,000
Operating expenses (8000)
PBT 22,000”You’ve got the Statement of Profit or Loss for Fatimah and Fatimah was owned for a complete 12 months so you determine the Statement of Profit or Loss for Harbin as a separate entity – simply deduct the Fatimah figures from the combined values
Then you can compare ratios that involve only Statement of Profit or Loss matter for Harbin for one year compared with the previous year
You should even be able to derive the figure for Harbin’s shareholders’ funds in order to be able to calculate the ROCE
OK?
Sorry – I thought in my earlier post that the two sets of figures were for Harbin and Fatimah respectively rather than for Harbin and the consolidation combined
Is that better?
ya but I am having a problem to find the net asset of the fatima because no fatimah financial position is given ?
The another problem is does it will affect those inventory holding period, trade payable payment period ,receivable collection period ratio when calculate without include fatima?
For example:
like the trade payable payment period= Average payable/ Credit Purchase X 365 days
For the credit purchase, due to this question does not given purchases so we use cost of sales . Does it need to remove the cost of sales for fatimah 40,000? so that to calculate the trade payable payment period?Does the question specifically ask you to calculate the ratios without the Fatimah element?
a) calculate the ratio for harbin for the year ended 30 september 2007 equivalent to those calculated for the year ended 30 september 2006 (show ur working)
b) Assess the financial performance and position of Harbin for the year ended 30 september 2007 compared to the previous year. Your answer should refer to the information in the chief executive report and the impact of the purchase of the net asset of fatimaDo we know the Equity Share figure for Fatimah? I can’t see it anywhere in your posts
do u mean the harbin( parent ltd) share price for ordinary share? if yes, it is $1 per share for harbin
and the question does not state any equity share figure for fatimah except mentioned the parent bought the fatima whole net asset for $100 million. This is the acca f7 year 2007 question question 3Just found the question (Singapore version)
Harbin acquired the NET ASSETS – it didn’t acquire the share capital. Just the net assets.
I can see that the fair valued net assets were worth $90,000 at date of acquisition ($100,000 purchase consideration resulted in a $10,000 goodwill figure) and that $22,000 profit before tax would result in $16,500 profit after tax of 25%
There is no concept of stripping out the Fatimah figures. The exercise is simply to calculate the equivalent ratios this year and compare them with last year’s comparative figures
That should make it easier for you!
This is the answer I taken from bpp revision kit 2010
the answer is doing in that ways (including fatima and excluding fatima)
so I am so curious about it and I saw the answer for calculate roce (excluding fatima) where the capital employed or net asset is use 114,000- (22,000-5500)
I dont understand is why using 114,000-(22,000-5500) ? and where to get the 114,000
and it does not have those payable, receivable inventory ratio for excluding fatima and have only including fatimaROCE (Including Fatima )
16,000+ 8,000/
114000+100,000
=11.2%ROCE (Excluding Fatima)
24,000 -22,000/
114,000 (22,000 -5,500)
=2.05%Net asset turnover (Including Fatima)
250,000/
114,000+100,000
1.17
Net asset turnover (excluding fatima)
250,000-70,000/
114,000 -(22,000 5,500)
=1.85Net profit margin (including fatima)
16,000/
250,000
= 6.4%Net profit margin (excluding fatima)
24,000- 22,000/
250,000 70,000
=1.1%Current ratio (including fatima)
38,000:44,000 0.86:1Closing inventory holding period (including fatima)
25,000/200,000× 365 days= 46 daysTrade receivables collection period (including fatima)
13,000/250,000× 365 =19 daysPayables payment period (including fatima)
23,000/200,000× 365=42 daysGearing (including fatima)
100,000/
100,000+ 114,000
=46.7%“I dont understand is why using 114,000-(22,000-5500) ? and where to get the 114,000”
$114,000 is share capital ($100,000) and retained earnings ($14,000)
In so far as it is possible to calculate the Fatimah contribution to the Harbin this year results, that’s fine.
But if it’s not possible, then ….. it’s not possible
Lily, how many marks are there for the ratios in the marking scheme?
No matter what ratios you calculate, it’s probably the case that the interpretation of your calculations is more important (and worth more marks)
Even though your calculations may be incorrect, it’s still the case that your interpretation on those incorrect calculations will score the interpretation marks
This is the marking allocation
Marks
(a) one mark per required ratio 8
(b) for consideration of Chief Executive’s report 3
impact for purchase 6
remaining issues 1 mark per valid point 8
17
Total for question 25
That means the inventory, payable and receivable ratio will not be affected by whether purchase or not purchase the fatimah?
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