Accounting And Finance For Business - Joyce Corp Ltd - Case Study Assessment Answer
Solution Code : 1ADGB
Question : Accounting Case Study
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Accounting Case Study Assignment
Assignment task
Case Study 1
Case Study 2
Case Study 3
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Solution:
Case 1
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 = $94.84)
Case 2
Nick Scali Ltd
- Holding Period Return from 1st January 2005 to 31st December 2015
- NCK: Holding Period Return:
- Formula: (Closing price – open price + dividends)/open price
Kathmandu Holdings Limited
Joyce Corp Ltd
Super Retail Group Ltd
Case 3
Nick Scali Ltd
1. a. Growth of EPS for NCK over the five years to 30th June 2015
Basic EPS 2010: 13.9
Basic EPS 2015: 21.1
Growth of EPS
[(21.1/13.9)^1/5] – 1 = 8.71%
b. The Asset Turnover Ratio, Net Profit Margin, Net Debt to Equity Ratio, Leverage Ratio and Return on Equity for the company for both financial years
2009/10: AUD$’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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