Question 1. Describe the principal activities of the company?
Thorntons is a British multi-channel confectionery retailer, which is considered as the leading premium chocolate brand in the UK, with shopper purchase exceeding £300 millions in 2014. The company operates through two business segments, namely retail and fast moving consumer goods. The main activities of Thorntons include manufacturing, retailing and distribution of high quality chocolate, toffee, and fudge with luxury and special packages. Apart from approximately 400 stores across the UK and Ireland, Thorntons also expands its business globally through online selling by providing international delivery.
Question 2. Define the revenue recognition criteria of the company …show more content…
Allowances and provision are also made for expected returns as essential.
• Revenue from the provision of selling goods online: revenue is recognized at the point when the risks and rewards of the inventory have dispatched to the customers.
Question 3. Describe how the company values all classes of property, plant and equipment? Identify the note (number) this is stated?
• The value of Thorntons’s property, plant and equipment (PP&E) is calculated as cost less accumulated depreciation. Apart from the purchase of PP&E, cost also consists of incidental costs of acquisition.
• Subsequent costs are recognized as separate asset only if the costs have probability of future economic benefits and can be measured reliably.
• Costs of repairs and maintenance expenditure is showed in the Income statement as incurred.
• Asset and lands used for construction are not depreciated. Otherwise, Thorntons uses straight line method to calculate depreciation of other PP&E throughout the useful life of these …show more content…
Profitability analysis
Analysis of NOK’s profitability
Ratio
2010(%)
2011(%)
2012(%)
2013(%)
2014(%)
Return on equity (ROE)
6.52
13.47
-8.87
-31.16
-8.47
Gross margin ratio
32.36
30.2
29.28
27.8
42.06
NOK’s profitability can be shown by two ratios, including return on equity ratio (ROE) and gross margin ratio.
• ROE represents how much the owners earned for each dollar they invested in the company. Between 2010 and 2011, ROE increased by double, from 6.52% to 13.47%. Despite growing impressively, ROE of NOK experienced a dramatic decrease from -8.87% to -31.16% in 2012 and 2013, respectively. After reaching the bottom in 2013, there is a substantial rise in ROE in 2014 (-31.16 to -8.47). However, the increase did not positively change the situation. In other words, the owners still lost 8.47 cents for every dollar invested. The probable explanation for this downward trend during the period is that the net income in 2010 was $891 millions with 36.62% invested, in 2014, it declined to -$615 millions with 25.68% invested. Overall, the deterioration of this ratio indicates that NOK managed the equity ineffectively and could not produce any