conday and co ltd has been in operation for three years and produces antique reprodu 535131
Conday and Co. Ltd has been in operation for three years and produces antique reproduction furniture for the export market. The most recent set of financial statements for the business is as follows:
Statement of financial position as at 30 November
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conday and co ltd has been in operation for three years and produces antique reprodu 535131
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|
£000 |
|
|
ASSETS |
|
|
Non-current assets |
|
|
Property, plant and equipment (cost less depreciation) |
|
|
Land and buildings |
228 |
|
Plant and machinery |
762 |
|
990 |
|
|
Current assets |
|
|
Inventories |
600 |
|
Trade receivables |
820 |
|
1,420 |
|
|
Total assets |
2,410 |
|
EQUITY AND LIABILITIES |
|
|
Equity |
|
|
Ordinary shares of £1 each |
700 |
|
Retained earnings |
365 |
|
1,065 |
|
|
Non-current liabilities |
|
|
Borrowings – 9% loan notes (Note 1) |
200 |
|
Current liabilities |
|
|
Trade payables |
665 |
|
Taxation |
48 |
|
Short-term borrowings (all bank overdraft) |
432 |
|
1,145 |
|
|
Total equity and liabilities |
2,410 |
|
Income statement for the year ended 30 November |
|
|
£000 |
|
|
Revenue |
2,600 |
|
Cost of sales |
(1,620) |
|
Gross profit |
980 |
|
Selling and distribution expenses (Note 2) |
(408) |
|
Administration expenses |
(194) |
|
Operating profit |
378 |
|
Finance expenses |
(58) |
|
Profit before taxation |
320 |
|
Taxation |
(95) |
|
Profit for the year |
225 |
Notes:
1 The loan notes are secured on the land and buildings.
2 Selling and distribution expenses include £170,000 in respect of bad debts.
3 A dividend of £160,000 was paid on the ordinary shares during the year.
4 The directors have invited an investor to take up a new issue of ordinary shares in the business at £6.40 each making a total investment of £200,000. The directors wish to use the funds to finance a programmed of further expansion.
Required :
(a) Analise the financial position and performance of the business and comment on any features that you consider to be significant.
(b) State, with reasons, whether or not the investor should invest in the business on the terms outlined.
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