Page 11 - CIMA OCS Workbook May 2019 - Day 1 Tasks

SUGGESTED SOLUTIONS

CHAPTER SIX – F1

EXERCISE 1 – FINANCIAL STATEMENTS

Ratio 2019 (budget) 2018 2017

Growth in revenue 19.8% 48.8%

Growth in cost of sales 18.8% 52.6%

Growth in gross profit 22.7% 38.3%

Gross profit margin 25.0% 24.4% 26.3%

Growth in operating expenses 22.8%

Growth in operating profit 60.2%

Operating profit margin 11.8% 10.9%

Inventory days 21 22

Receivables days 53 67

Payables days 44 61

Length of operating cycle 30 28

Question Response

Did VitaMine perform Positives
well in 2018? • Huge growth in revenue of 49%, resulting in 59% increase in PBT
• Increase in operating margin from 10.9% to 11.8%
• Have E$64k more cash compared to previous year despite paying a
dividend of E$1,200k
Negatives
• Slight fall in GPM from 26.3% to 24.4%
• Operating cycle has worsened from 28 to 30 days

Why had turnover • Mainly due to volume increase of 47% (p21) rather than price or mix
increased in 2018? changes
• Main driving factor is industry growth – the VMS industry has seen
“unprecedented growth” (p13) due to “a worldwide ageing
population; increased consumer awareness of preventative
healthcare; channel proliferation; new products formats and a shift
from ingredient messaging to broader brand positioning.”
• On p3 told “The company has gained a reputation in the market as a
company that delivers an excellent quality of product and service”
• In addition, it could be that VitaMine has done particularly well due
to coping better with one or more of the above factors, such as
brand positioning or channel strategy (such as selling via Vitasite)

KAPLAN PUBLISHING 51