3500 words
- Demonstrate ability to record business transactions, prepare a trial balance and understand the application of financial reporting standards.
- Prepare and critically analyse financial statements for sole-traders and companies’ in accordance with appropriate principles and accounting standards.
- Evaluate financial position and performance of business organisations.
- Prepare a statement of cash flow in accordance with IAS 7
Task 1: (a) Discuss two main branches of accounting and analyse the user groups of each branch of accounting. Explain what financial information they need for decision making purposes, which can be provided by the relevant branch of accounting. (10 marks) (b) The International Accounting Standards Board is the independent standard setting body of the IFRS Foundation. Discuss the role and objectives of International Accounting Standards Board. (10 marks)
Task 2: You work as a finance supervisor in the head office of a retail company. Finance executive of the company is interested in buying shares in one of two companies (Sports Direct International PLC and JD Sports Fashion PLC). You have been asked to assist the finance executive in making such decision. (i) Sports Direct International PLC Sports Direct is a British retailing group that was established in 1982. It is the largest sports-goods retailer in the UK. The company operates around 670 stores worldwide. Sports Direct International PLC is currently the UK’s largest sporting goods retailer and operates a diversified portfolio of branded sports, fitness and fashion goods. Further information can be found on the Sports Direct website and in the recent annual report online. (ii) JD Sports Fashion PLC The company was established in 1983 and was first listed on London Stock Exchange in October 1996. The JD Group has well over 800 stores, including sports and branded fashion. The Group grew organically until 2002, when it acquired nearly 200 stores with the acquisition of First Sport. JD operates in the UK and the Republic of Ireland and through Chausport in France. Further information about the JD Sports can be found on its website and in the recent annual report online. Required: Prepare a report for potential investors and analyse financial information for both companies and give your recommendation on which company is the best option for investment. The report must include:
- a) The calculation of financial ratios for two years (2018 and 2019)
- Current ratio • Net profit margin • Gearing ratio • Earnings per share • Dividend pay-out ratio (10 marks)
- b) Analyse the performance, financial position and investment potential of both companies. You should use charts to compare the performances of both companies. You will need to examine the audited financial statement and carry out further research online in order to explain the performance of each company for the two years. (15 marks)
- c) Provide recommendations how the financial performance of poorly performing company can be improved. (10 marks) (You are expected to search for more information on both companies and cite the material correctly, using the Harvard guidelines)
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