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Analyze the performance of Company Aye Limited by answering the questions below. Support

your analysis with specific items and balances and ratios from extracts of financial information

above only.

Note:

In Seminar $6,$ we learn to complement our analysis of the performance of a company with cash

flows.

In Seminar $6,$ before we learn Financial Analysis, our analysis was more generic whereby we

could only deduce the performance of the Company using increases$/$decreases in balances only.

In this team assignment, we would be able to support our analysis in greater depth by using

appropriate ratios.

a$)$ How was increase in Gross Profit and Net Profit likely to have been achieved?

The increase in Gross Profit and Net Profit were predominantly driven by Revenue as

analyzed from year$-$on$-$year increase in the

f Revenue.

Specifically, this can be demonstrated from the

Margin had remained largely consistent throughout the $5$ years.

However,

$\_$ Margin had decreased in $2015$ and this may likely

be attributable to the increase in remuneration of the CEO.Question $1$ b$)$ How was the increase in Revenue likely to have been achieved?

The increase in Revenue was likely achieved with relaxation of credit policy as analyzed by the

increase in the

of Trade Receivables.

Specifically, this can be demonstrated from the decrease in

and the increase in

$.$ Trade Receivables are taking longer

to pay the Company as a result of the relaxation of credit policy. $($assume all Revenue

were credit Sales$)$

${?}^{?}$ n$.$a$.$ as balance for $2010$ is not available for a good comparative analysis

c$)$ Comment on the potential areas of concern in the upcoming financial years.

he increase in the average collection period is a "red flag" for potential issue of

The financial statements of Company Aye Limited $("$the Company"$)$ reported the following

information for its financial years $("$FY$)$ ended $2011-2015.$

Company Aye Limited appointed a new Chief Executive Officer at the end of its FY $2014$ in

line with its strategy to expand its operations and increase profitability. The remuneration

arrangement of the Chief Executive Officer is based on the profitability of the Company.

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