Income statements for the year ended 30 November

Year 4 Year 5
?000 ?000 ?000 ?000
Revenue 4,940 6,850
Cost of sales
Opening inventories 630 930
Purchases 3,320 4870
Closing inventories (930) (3,020) (1,150) (4,550)
Gross profit 1,920 2,300
Expenses (1,460) (1,850)
Operating profit 460 450

Balance sheet as at 30 November

Year 4 Year 5
?000 ?000
Non-current assets 2,600 3,210
Current assets
Inventories 930 1,850
Trade receivables 820 1,230
Bank 20 10
1,770 3,090
Total assets 4,370 6,300

?1 ordinary shares 1,000 1,800
Share premium 400
Reserves 2,810 3,260
3,810 5,460
Current liabilities 560 840
Total equity and liabilities 4,370 6,300


Assume that you are an external consultant to Nova Ltd. Prepare a report for the board of directors commenting on the performance of the business over the two years using ratios and any other information that you consider appropriate.

Your report should address the following issues:

Reasons for using ratio analysis.
Description and justification of the ratios you decided to use
Calculation of the ratios.
Findings of your analysis with recommendations for action Nova Ltd needs to undertake in the future.
Limitations of your analysis with regards to the information you have been provided; what kind of information could help you to develop a more robust ratio analysis?
Limitations of ratio analysis in general

Word Limit: 1500 words excluding any tables or calculations

The report is to be written individually. The areas mentioned above must be covered in your report. The calculations required for the report will account for only 30% of your coursework mark. The emphasis must be on analysis and evaluation. Your reasoning must be supported through adequate and rigorous referencing (do not use the essential textbook as your only source) and the report must follow the Harvard style of referencing. The Academic Skills Unit (ASU) provides a sample of this form of referencing.

Please ensure while writing the report you clearly state all your assumptions and the reasoning behind them. Some of the required parts of the report do not have a correct answer and the mark awarded will depend on the application of the knowledge and understanding that you will display in your arguments.

You will be assessed on:

Coverage and application of relevant theory
Critical analysis of data
Critical evaluation of results
Evidence of reading and research (including sourcing and referencing using the Harvard referencing system throughout, accompanied by a bibliography)
Overall structure and presentation of report (including requirements listed below)

Your answer should be in report format. Please use 1.5 or double line spacing and font size no less than 12. Staple your work in the top left hand corner and print on one side of the paper only. You may put your work in a plastic folder, or bind it depending on your own preference. Submit a paper copy to the coursework point plus one electronic copy via StudyNet. Ensure that you attach an assignment feedback sheet to the front of your work. Display the word count (not including the references / bibliography, the appendices, and any tables or calculations you may use) at the FRONT page. State your name and ID number on the front of the feedback sheet as well as on the front page of the report.
Failure to follow any of these instructions will incur a penalty of up to 5% of the coursework mark.

Submission date: Tuesday 16th December 2008