Profitability planning

West Wood Leisure is a rapidly growing company which owns a number of health clubs and leisure centres. Presented below is summary financial information for the current year for West Wood together with management’s financial plan for the next three years. The company has an issued share capital of 1 million ordinary shares and this is not expected to change during the planning period.

The managing director has declared that two key financial objectives over the period are: (1) to at least maintain current rates of return on investment, and (2) to achieve growth in earnings per share of at least 10 per cent per year.

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As an assistant to the financial manager you are required to carry out whatever financial calculations you consider necessary to determine if management’s plans will achieve the managing director’s objectives. Comment on your findings.

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