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Financial Performance Analysis of Savory Snacks Company: Report for Tech-4-U Ltd
| University | Cambridge Management and Leadership School (CMLS) |
| Subject | Financial Analysis |
Savory Snacks Company
Savory Snacks Company Ltd (SSC) is a well-established company which manufactures bread and bakery products. The company was started many years ago by a brother and sister who have since died and left the business to several family members. It is a well-respected company in the industry, known for the quality of its bakery products and the old-fashioned values of its company members.
Due to their family expertise in baking, they have neglected the administrative side of the business and are currently trying to ‘catch up’ with the rest of the industry in computerising their inventory and accounting systems. For the past year they have invested a considerable sum of money in trying to develop bespoke hardware and software for their business, but this has been slow and beset with many design problems as the company they contracted for the work failed to recognise the complexity of their business. They have decided to terminate the contract with the previous computer software design company and have approached Tech-4-U Ltd with a view to that company taking over the project. Costs previously spent on design of hardware and software have been written off as expenses in the current year’s statement of profit or loss.
Sandra Brennan is the credit manager for Tech-4-U Ltd which is a medium sized software design company formed only two years ago. She is hopeful that there will be few problems with the receipt of progress payments during the contract as Savory Snacks Company is such a well-known, established company, However, Tech-4-U are naturally cautious and wish to investigate the credit worthiness of the Savory Snacks Company before the resources of this new technology company are committed to this substantial project. She has obtained a copy of TTC’s most recent published financial statements – statement of comprehensive income and statement of financial position and for the years ended 2023 and 2024 (see Table 1) and also industry average ratios for the bakery products manufacturing sector (see Table 2).
Over the past year, selling prices for bread and bakery products have increased by over 7%. Furthermore, purchase prices of raw materials such as flour have risen by 12% during the year and are still rising. Heat, light and power costs have increased substantially also.
Do You Need Assignment of This Question
Attachments:
- Table 1 – Statement of comprehensive income, statement of changes in equity and statement of financial position for years ended 30 June 2023 and 2024
- Table 2 – Industry average ratios for 2024
Required:
Write a report to Sandra Brennan, credit manager for Tech-4-U, on the financial performance of Savory Snacks Company which would be of assistance in her decision on whether to commit to this substantial project.
Your report should:
- Include calculation and analysis of appropriate financial ratios for Savory Snacks Company Ltd for 2023 and 2024 along with a comparative analysis to industry average ratios.
- Use information contained in the text of the case study.
- Evaluate company performance.
- Include any ratios calculated in a table contained in an Appendix at the end of the report.
- Be between 1,000 – 1,500 words in length (total length including Appendix).
- Be typed using Microsoft Word, using a correct report format and uploaded via the Turnitin fuction in moodle (under the topic heading of Assignments 1,2,3) before 4 May at 23:59.
Table 1
Statements of profit or loss for the year ended 30 June:
| 2023 | 2022 | |
|---|---|---|
| €000s | €000s | |
| Revenue | 3,670 | 3,100 |
| Cost of sales | (2,480) | (1,900) |
| Gross profit | 1,190 | 1,200 |
| Other operating income | 350 | – |
| Administrative expenses | (590) | (400) |
| Distribution expenses | (260) | (200) |
| Operating profit | 690 | 600 |
| Finance cost | (140) | (95) |
| Profit before tax | 550 | 505 |
| Taxation | (102) | (78) |
| Profit after tax | 448 | 427 |
Buy Answer of This Assessment & Raise Your Grades
Statements of Financial Position as at 30 June
| ASSETS: | 2024 | 2023 | |
|---|---|---|---|
| €000s | €000s | ||
| Non-current assets | |||
| Property, plant & equipment | 3,830 | 2,430 | |
| Financial assets | – | 512 | |
| Total Non-current assets | 3,830 | 2,942 | |
| Current assets | |||
| Inventory | 270 | 220 | |
| Trade Receivables | 606 | 350 | |
| Bank | 12 | 93 | |
| Total Current assets | 888 | 663 | |
| Total Assets | 4,718 | 3,605 | |
| EQUITY & LIABILITIES: | |||
| Equity | |||
| Ordinary Shares of €1 | 650 | 650 | |
| Revaluation | 400 | ||
| Retained earnings | 1,568 | 1,437 | |
| Total Equity | 2,618 | 2,087 | |
| Non-current liabilities | |||
| Long-term loan | 1,500 | 1,100 | |
| Current liabilities | |||
| Payables | 498 | 340 | |
| Taxation | 102 | 78 | |
| Total Current liabilities | 600 | 418 | |
| Total Equity & Liabilities | 4,718 | 3,605 | |
Additional information:
In 2023, 75% of sales revenue were on credit, with the remaining being cash sales.In 2024, 80% of sales revenue were on credit, with the remaining being cash sales.
Financial assets are included at fair value at the year end. Financial assets
were sold during the year ended 30 June 2024 at a profit of €350,000.
This profit is included in the Statement of profit or loss as ‘other operating income’.There was no change in the fair value of the remaining investments held duringthe year.
Included in Property, plant and equipment there was a revaluation of land of €400,000.
Table 2
| ROCE | 23% | Inventory turnover days | 20 days |
|---|---|---|---|
| Net Profit % | 21% | Receivables collection period | 43 days |
| Gross Profit % | 40% | Payables payment period | 55 days |
| Asset turnover | 1.1 times | Gearing (Debt/Total capital) | 25% |
| Current ratio | 2 : 1 | Interest cover | 5 times |
| Acid test ratio | 0.9 : 1 |
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