David is the new accountant for a company that builds small aeroplanes for hobby enthusiasts: Bachelor of Business Accounting, Assignment, WSU, Australia

University Western Sydney University (WSU)
Subject Bachelor of Business Accounting


This assignment aims to reinforce and extend students’ knowledge and understanding of key topics in this course (HC1010) including Overview of Accounting, Organisational Structure & the Reporting Environment, Corporate Governance, Statement of Financial Position, Statement of Financial Performance, Cash Flow Statement, Financial Statement Analysis, Accounting for Business Transactions, Cost Concepts & Behaviour, Preparation of Budgets, and Cost-Volume Profit-Analysis through independent research and application of knowledge and skills.

Assignment Details:

David is the new accountant for a company that builds small aeroplanes for hobby enthusiasts. The company, HobbyAero Ltd, employs 200 people. About 3 years ago, the company underwent a major expansion of its aeroplane-building facilities because of increased demand for its aeroplanes from overseas buyers. To do this it borrowed $10 million through a loan from a bank.

The loan agreement contains the following clauses:

i) HobbyAero is to maintain a current ratio of at least 2:1

ii) The after-tax profit margin must be at least 10 per cent
If the company fails to meet either ratio in any year, the $10 million is immediately payable.

Last year the government removed a 20% tariff on small aeroplanes and the company has had difficulty competing against international competitors. Consequently, the company has had to reduce its profit margins to compete with overseas suppliers.

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