1. An investigation into the Accounting and Financing of Courts Jamaica Limited.
Name : Alex Ellis
School : Oberlin High
Territory : Jamaica
Registration # : 100086
Teacher : Ms Coleman
Centre # : 100086
Date : April 2011
Content Page
Acknowledgement 3
Aims 4
Introduction and Objectives 5
Methodology Employed 6
Report 7 - 12
Conclusions and Recommendations 13
Bibliography 14
Appendices 15 - 20
This project is the fruit of concerted efforts. A project of this magnitude was
effectively compiled with the assistance and contribution of a number of
individuals; gratitude must be extended to such persons.
The researcher would like to thank God almighty for giving him the health and
strength he need to complete this Management of Business Internal Assessment, so
as to meet the requirements of the Caribbean Advanced Proficiency Examination
syllabus.
The researcher would like to give credit to his teacher Miss Coleman for the
role she played in outlining the task I am expected to perform.
I would like to express my warmest thanks to my friends at school who
contributed significantly to my project.
Finally, I would like to say thanks to the staff at the school’s computer
labs that went beyond the call of duty to ensure that the necessary resources
were available and the attention was forth coming so that my project was
completed efficiently.
The aim of this research is to concentrate on the systematization of
Courts Jamaica Limited. The focus is on the Business Accounting and Finances-
Module 3. The objectives of the business are to provide affordable furniture and
appliances to the Jamaican people, create values for their stockholders by
providing quality goods and services, make huge amounts of profit and sell large
amounts of shares. This research was done in the context grasping the business
aspects of the business environment, including theoretical knowledge of these
aspects from a practical standpoint of owning business. Also, this research
gives me a chance to start my examinations with twenty percent (20%) of the
available marks.
This project is designed to thoroughly research a legal form of business. The
2. project involved the relevant information that will give students the general
understanding of how such a firm operates. The contents of the research seeks to
give a comprehensive round up of all the areas of the business, however,
specific attention was focused in three broad areas in the operation field. This
project covers the areas that are included in the unit one Caribbean Advanced
Proficiency Examination (CAPE) syllabus for Management of Business.
This project will look specifically on Module three of the syllabus which deals
with the company Accounting and Financing. The areas which will be covered are:
The business source of finance
Criteria for seeking finance
Use of accounting information
Accounting procedures and measures
Financial statement and analysis
Major concepts
This project also contains a chapter that looks at the business published
accounts. The information placed in this section was those obtain from the
secondary source of data collection
In order to accurately obtain the relevant information needed to complete this
project both primary and secondary methods of data collection were used. The
primary mean of collecting data involved the use of questionnaire. The
questionnaire consisted of twenty questions, of open and closed ended questions.
The questionnaire was very simple to use and answered all the questions the
researcher needed to effectively compile his project, hence, the method
effective and widespread. A total of three questionnaires were issued using a
random sampling approach.
Secondary means of data collection involved the use of textbooks,
newspapers and magazines. This method of data collection also played an
important role in the effective compilation of my project. The textbook used in
the data collection process, contained the general information that corresponded
with the CAPE syllabus, these information provided a linkage between what is
being thought and what it is actually like in the business place. The
information that the newspapers and magazines contained was vital in effective
completion of the research. The published accounts of the firm were found in
these means of data collection. These two sources used in the data collection
process were sufficient to complete my research.
The researcher during the research faced few problems such as: limited
amount to have a thorough research on the topic, due to the fact the researcher
time had to be balanced out with other internal assessments. Another problem
faced by the researcher was that he did not have enough equipment to get the
assessment done on time.
The Courts Jamaica Limited as the name suggested is a public limited company,
that is to say that the business is privately owned by shareholders and its
shares are listed on the Jamaica Stock Exchange and these shares are freely
transferable of the company are published on a yearly basis in the form of
annual reports and are open to public scrutiny. This means that the business has
little privacy in its operation. It is domiciled in Jamaica and also a
subsidiary of Courts Furnishers (Overseas) Limited which is incorporated in
England and which is seventy nine point nine percent (79.9%) of the company’s
issued stock units.
An economic system is the framework design to allocate the scarce
resources of a country. The resources of Jamaica are allocated through a mixed
economic system; in this system there is some private and some public ownership
of its economic resources. In this type of economic system, Courts Jamaica
Limited is forced to produce a wide range of quality furniture and appliances at
an affordable price to the Jamaican consumers, in order to effectively compete
on the local market. In this type of economy the company also forces
restrictions and laws, which may affect its operation.
Courts Jamaica Limited and all other businesses are faced with the problem of
3. financing business activities. The company has the need to finance its
working capital and it’s the day to day finance, needed to pay bills and
expenses and to build up stocks. Businesses also need to finance investments
such as special projects and expansions. Courts Jamaica Limited finance the
needed to increase the firm’s capital assets when the company undertakes
expansion, the company on occasion pay for research and development of new
products.
In general companies have a variety of sources which it can finance from; these
sources are normally internal or external sources. The internal sources of
finance include retained profit (is profit after tax that has not been returned
to owners), working capital and sale of asset. External sources include share
capital, loan capital such as mortgage; and debentures also bank overdraft and
trade credit. The diagram below shows the company sources of finances.
Courts finances its businesses activities through stockholders equity and
profits retained. As a limited company Courts issues shares, the capital raised
from this venture is used to finance business activities. If a company is
trading profitability some of these profits will be taken in by the government
as corporate tax and some is nearly always paid out to shareholders this is
known as dividends. If any profits remain; this retained in the business and
become a source of finance for future activities this is known as capital
reserve, which can also be used to redeem shares. The profit retained by Courts
is its first source of finance. Accounting act as system, which process business
data so that stakeholders can be provided with means understanding how well an
organization is performing. As it’s with Courts accounting information is
particular important to the company financial decision makings. The company
makes choices that are in its best financial interest. In recording accounting
information Courts use Profit and Loss account Statement of Cash flows and
Statement of changes in stockholders’ equity.
When Courts Jamaica Limited is about to seek finance it has certain criteria for
selecting the source of financing these include; cost, use of funds and its
financial situation. The cost criterion deals with choosing sources which are
less expensive both in terms of interest and interest payments administrative
costs. When undertaking heavy capital expenditure the company normal funds this
by the use of long term sources which is normally an external source.
The company’s accounting information is used by various groups and the company
financial statements have to be published. The users of the company financial
statements include owners, employees, tax authority, competitors, management and
government. The need for the company financial information by the different
groups are different where employees use it when discussing wage bargains,
managers when recording, analyzing and controlling the company operations,
owners for assessing performance, tax authorities to show proof of income,
competitors for analyzing the company stability and performance, and the
government for statistics on companies.
The company when recording its financial information it has several accounting
concepts which it has to follow in order for the business to reflect a true and
fair view of its financial position. These concepts are the accruals concept,
consistency concept, separate entity, money terms and historical cost. The
accruals concept that costs and revenues should be matched with the period in
which they occur. The consistency concept states that when one decision has been
made about the treatment of a transaction it should not be change. A business is
a legal person in its own right and has a separate identity from that of the
owners is what is outlined by the separate entity concept. Money terms indicates
that when business transactions are being recorded it should be recorded in a
monetary value while historical cost stipulates that all assets are valued
according to their original cost rather than what they currently worth.
4. Financial statements are formal records of the financial activities of a
business. A limited company set of financial statements includes a balance sheet
(a summary at a point in time of business assets, liabilities and capital),
income statement (shows the a business income after expenses and tax from
operating profit), cash flow statement (shows a company sources and uses of cash
in a trading period) and notes which explained the figures in the other
financial statements.
The financial statements of the company are structured in a particular manner
and must certain key elements which they must consist. Each financial statement
has its own purpose as stated above where a brief description of their purpose
where given.
The balance of the company should contain the following: the company assets, its
liabilities and the company equities. The balance sheet should have the company
name on it the date for which it had been prepared for and the currency which it
being expressed in. The assets should be listed first then followed by the
liabilities then equities.
The income and cash flow statement should enlist the revenues, the gains,
expenses, profits or losses and the comprehensive income. They should also give
the company name, the date for which it is prepared for and the currency which
it is expressed in.
Ratio analysis is done by comparing and assessing a company performance by means
of accounting data. The net profit margin as a profitability ratio assesses how
successful the management of a business has been at earning profits for the
business. The ratio compares the business net profits for the business. The
ratio compares the business net profits for the business net profit with its
sales.
Gross Profit Margin (%) = Gross Profit x 2,552,273 x 100 =
55.6%
` Sales Turnover 4,591,907
Courts Jamaica Limited gross margin is high; this gross profit is only fifty
five point six percent (55.6%) of its sales turnover. This is indicated by
figure 2 in the appendices, where it explains that sales is sixty four percent
(64%) and gross profit is thirty six percent (36%) given a ratio of 1.8:1,
therefore for every one dollar eighty cents ($1.80) of sales one dollar ($1.00)
goes to gross profit. This is a good sign since it will yield a good net profit
margin as indicated by figure 3 where the sales is eighty four percent (84%) and
net profit is sixteen percent (16%), showing that there is a ratio of 5.1:1,
therefore the company the company makes one dollar profit from every five dollar
ten cents. The profitability ratio compares the profit of the business with
sales, assets and capital employed. The gross profit margin is a good indicator
of how effectively managers have added value to the cost of goods sold.
Current Ratio (%) = Current Assets x 4,043,643 x 100 =
600.95%
` Current Liabilities 672,873
Liquidity ratio assesses a business ability to pay its short-term debts. Current
ratio, as a current ratio compared to current assets with current liabilities.
Current ratio of Courts is 6:1 and the company high current ratio suggests that
the company is able to pay off its creditors six times. This is show in figure 1
in the appendices where it indicates that of the total current assets and
current liabilities, current assets total eighty four percent (86%) while
current liabilities total fourteen percent (14%). This is a good ratio because a
business current asset should be at least two times its current liabilities and
the company ratio is 6:1.
Courts Jamaica Limited is a public listed company incorporated and resides in
Jamaica. It is a subsidiary of Courts Furnishers (Overseas) Limited which is
incorporated in England and which holds 79.9% of the company’s issued stock
5. units. The ultimate holding company is Courts PLC, which is also incorporated in
England. The principal activities of Courts Jamaica Limited consist of the
retailing and the hire purchase financing of furniture and appliances. When
Courts started its operations, furniture was being imported; however this has
changed. The change being referred to is a switch in 1965 to all locally
manufactured furniture in the company’s effort to assist in the development of
the domestic furniture manufacturing industry.
It could be concluded that Courts Jamaica Limited has various sources of finance
and has criteria for choosing the source of funds. It could also be concluded
that the company follow some of the major accounting concepts and a lot of
different groups of people uses the company accounting information for various
reasons.
The researcher would like to recommend that the company continue to using the
accounting concepts it’s using now and adopt other principles was well as
conventions. The recommends that Courts Jamaica Limited increase on the
availability of internal sources of fund so has to reduce the cost associated
with borrowing.
Hall, D., Jones, R., Raffo, C., Chambers, I., & Gray, D. (2004). Business
Studies. London: Pearson Education.
Wood, F., & Sangster, A. (2008). Business Accounting 2. London: Prentice Hall.
Questionnaire
1. What form of business does the company operate?
( ) Sole Trader ( ) Partnership ( ) Limited Company ( ) Corporation ( )
Cooperatives
2. What is the objective of your business?
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3. What line of business is the firm engaged in?
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4. Which management style is employed?
( ) Directive ( ) Paternalistic ( ) Constitutional ( ) Participative
5. Is this management style effective? ( ) Yes ( ) No
b). Explain your response.
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6. What is the span of control like in the organization?
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7. How is information communicated within the company? ( ) Vertical ( )
Horizontal
8. Are job descriptions issued to prospective employees? ( ) Yes ( ) No
B) What do they include?
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9. What are the factors of production employed by the business?
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10. State the scale of production – e.g. 50 sales per day, 1000 products made
6. each week?
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11. Is the business labour or capital intensive?
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12. Are there normally any production/sales problems that this enterprise
encounters?
( ) Yes ( ) No
B). If so what are they?
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13. What are the business sources of capital? ( ) Loans ( ) Shares ( ) Retained
Profit ( ) Dividend ( ) Other
If other state
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14. What kind of collateral is used by the business to secure loans and what are
the terms of repayment?
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15. How profitable is the business and what contributes to this?
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16. Does the business provide employment to citizens? ( ) Yes ( ) No
17. Do the working conditions for employees meet the legal guidelines? Explain.
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18. Explain the safety procedures followed, if any:
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19. Are the products of the business exported? ( ) Yes ( ) No
20. How does the business help in the development of the country?
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FIGURE 1
FIGURE 2
FIGURE 3
