Case Study: Foxgloves Ltd

Question 1
(All calculations for Question 1 are shown in Excel File)
Foxgloves Ltd.
Income Statement for the year ended 30 June 2016 £ £
Sales 1,351,000.00
Less : Cost of Sales
Purchases 534,000.00
Less : Closing Inventory 48,000.00 486,000.00
Gross Profit 865,000.00
Less : Expenses
Operating Cost 733,000.00
Depreciation: Building 17,560.00
Depreciation: Motor Vehicles 6,000.00
Depreciation: Fixtures 30,000.00
Bad Debts 2,500.00
Interest on Loan 18,300.00
Interest 12,690.00 820,050.00
Profit before Tax 44,950.00

Foxgloves Ltd.
Statement of Changes in Equity for the year ended 30 June 2016

Ordinary Capital
£ Retained Profit
£ Total Equity
£
At 1 January 2016 423,000.00 - 423,000.00
Profit for the year - 44,950.00 449,500.00

Therefore by paying the final dividend will not have any effect on the income statement.

2. Statement of Changes in Equity
Statement of Changes in Equity shows how the equity of Alex and Will at the beginning of the year reconcile to their equity at the end of the year (Carey, Knowles, & Towers-Clark, 2014). By paying the final dividend, it will reduce the retained profits in the statement. It will have small impact on profits if the invested cash is to generate interest income.

3. Statement of Financial Position
Firstly, it will be recorded as short-term liabilities they pay the final dividend. Assuming they pay the final dividend using cash, it will reduce the bank balance from current assets and will also reduce the retained profits that are recorded under Equity in the Statement of Financial Position.
However, according to Liu & Espahbodu (2014), paying dividend will give a stable flow of earnings to Foxgloves Ltd., which can later choose to spend on new non-current assets or reinvestment. Furthermore, Alex and Will will receive a more stable income because dividend is added to their income.
Question 5
Buildings
New Valuation Cost £ 950,000.00
NBV of Building £

According to Hoffmann & Donald (1993), venture capital is a type of risky private equity because the new hotel may have a higher rate of failure, but the investors will be provided with the highest return from the capital gain on sales of the new hotel. Alex and Will must be well-prepared before they meet their investors and provide a good business proposal. According to Gonnerman (1984), an investor wants to look for business idea that can earn at least double the amount of investment in three years so drafting the concept of the business is