support@essaywritingexpert.orgYou are the Director of Finance at Toronto Ltd, a small manufacturing company in the United Kingdom (UK). It designs and manufactures machinery for use in the oil and gas industry. Toronto Ltd is a private limited company: its shares are not listed for trade on a stock exchange. The company’s main markets are in the UK, although it has started to expand into markets in Europe and North America. Due to this expansion, the Chief Executive of Toronto Ltd has suggested that the company should follow the international accounting standards that are produced by the International Accounting Standards Board (IASB). Carr’s Milling Industries plc are one of Toronto Ltd’s main competitors. The Chief Executive is keen to analyse the financial performance and financial position of Carr’s Milling Industries plc. She believes that figures contained in the financial statements of Carr’s Milling Industries will provide her with a complete understanding of Toronto Ltd’s main competitor. As part of its expansion into markets in Europe and North America, Toronto Ltd is considering a major investment in a new production facility. Senior managers at the company have identified two options for the new production facility, project A and project B. According to company policy at Toronto Ltd, proposed investments must be evaluated using the following technique: • Net present value The Chief Executive is keen to explore the use of other capital investment appraisal techniques. Each project has an expected life of five years. Sufficient funding is available to finance only one of the projects. Project A Project B $ $ Initial cost (year 0) 10,700,000 13,610,000 Scrap value (year 5) 1,010,000 1,220,000 Forecast net cash inflows Year 1 2,640,000 2,420,000 Year 2 2,140,000 2,850,000 Year 3 2,405,000 2,880,000 Year 4 2,560,000 3,700,000 Year 5 2,575,000 3,005,000 Toronto Ltd has a cost of capital of 10%. Question 1 International regulations have had an increasing effect on many companies and the preparation of their financial statements. Consider the following statement from Weetman (2015): Since January 2005, two different accounting systems have existed for companies in the UK, depending on the type of company. For the group financial statements of a listed company the accounting system set out by the International Accounting Standards Board (IASB) must be applied. All other companies, and the separate companies in the group, may choose to follow IASB standards, but there is no requirement to do so. Companies that do not choose to follow the international accounting standards must continue to follow the rules of UK company law and the UK FRC’s accounting standards. Weetman, P. (2015) Financial and Management Accounting, 7 th edition. London: Pearson. Required: Critically evaluate the Chief Executive’s suggestion that Toronto Ltd should follow the international accounting standards that are produced by the IASB. (25 marks) Question 2 Critically evaluate the Chief Executive’s belief that the figures in the financial statements of Carr’s Milling Industries plc will provide her with a complete understanding of Toronto Ltd’s main competitor. (5 marks) Question 3 Carr’s Milling Industries plc is a leading firm in the agricultural and engineering sectors. A link to Carr’s Milling Industries plc’s recent annual report is provided below (click on the ‘2016 Annual Report’ link) Required: With reference to appropriate financial ratios and an analysis of the information in the annual report, analyse and assess the financial performance and position of Carr’s Milling Industries plc. Your analysis should be undertaken from the perspective of a potential investor and should include a consideration of: • Profitability • Liquidity • Financing structure (35 marks)