Question Tag: Current Ratio

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PM – Nov 2024 – L2 – Q6 – Divisional Performance Measurement

Comparative analysis of Owerri and Isiekenesi event centers based on financial performance metrics

Question

Omegboje and company is a medium-scale outfit that specializes in the rental business in Owerri and Isiekenesi towns. The company operates a large event center in each city, supplying chairs, tables, and canopies for both outdoor and some indoor events.

Each event center manager has some independence in operations and earns a performance bonus of 10% of sales if they achieve more than the standard return on capital employed (ROCE) of 50%.

The following financial data is available for the two centers for the years ending December 31, 2020, and 2019:

Additional Information:

Revenue is derived from rentals and ancillary services.
Both centers have a cost of capital of 15%.
Ignore taxation and inflation.

Required:

a. Discuss the relative performance of the two centers based on: i. Return on Capital Employed (ROCE) ii. Residual Income iii. Profit Margin iv. Current Ratio v. Quick Ratio vi. Gearing Ratio vii. Interest Cover
(7 Marks)

b. Compute the performance bonus for the centers (if any), showing your workings.
(4 Marks)

c. Briefly outline the role of a Management Accountant in project management.
(4 Marks)

Answer

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Tags: Current Ratio, Gearing Ratio, Interest Cover, Liquidity Ratios, Profit margin, Quick Ratio, Residual Income, ROCE
Level: Level 2

Topic: Divisional Performance Measurement

PM – Nov 2014 – L2 – Q3 – Divisional Performance Measurement

Compare financial performance of Purity Nigeria Ltd. and Benchmark Co. Ltd using key financial ratios and offer strategic improvement recommendations.

Question

Purity Nigeria Limited is a company that produces table water. The company’s board
plans to restructure its operations with the aim of boosting its market share and
profitability.

The financial results of Purity Nigeria Limited and Bench Mark Co. Limited, which is
the leader in the industry, are as follows:

Operating Statements for the year ended 31 December, 2013

Summarised Statements of Financial Position as at 31 December, 2013.

Required:

a. Compute the following performance indices for both companies:
i Profit margin
ii. Asset turnover
iii. Returns On Capital Employed (ROCE)
iv. Current ratio
v. Debt-equity ratio (5 Marks)

b. Compare and analyse the performance of the two companies computed in (a)
above and explain what the board of Purity Nigeria Limited needs to do to
achieve their objectives. (10 Marks)

c. What other non-financial measures can influence the decision of the board of
Purity Nigeria Limited? (5 Marks)

Answer

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Tags: Asset Turnover, Benchmarking, Current Ratio, Debt-equity ratio, Profit margin, ROCE
Level: Level 2

Topic: Divisional Performance Measurement

FR – Nov 2021 – L2 – Q5 – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows using the indirect method and analyze current ratios and overdraft reasons for Dongo Limited.

Question

Dongo Limited statement of profit or loss for the year ended December 31, 2020:

Item	N’000
Revenue	420,000
Cost of goods sold	(99,000)
Gross profit	321,000
Administrative cost	(140,800)
Operating profit	180,200
Investment income	8,100
Interest paid	(17,120)
Profit before taxation	171,180
Income tax expense	(37,000)
Profit for the year	134,180

Dongo Limited statement of financial position as at December 31,

Additional information:
(i) During the year ended December 31, 2020; other comprehensive income was nil.
(ii) A dividend of N85,870,000 was paid during the year ended December 31, 2020.
(iii) There was no disposal of non-current assets during the year.

You are required to:
a. Prepare the statement of cash flows using the indirect method under IAS 7. (10 Marks)
b. Calculate the company’s current ratio as at the year ended December 31, 2019 and 2020. (2 Marks)
c. State THREE technical reasons which accounted for the company’s rise in overdrafts for the TWO years.

Answer

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Tags: Cash Flows, Current Ratio, Financial Statements, Overdraft Analysis
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: NOV 2021

FR – Nov 2021 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Calculate and analyze financial ratios for Onye Nigeria Plc for the years 2019 and 2020.

Question

Below are the statements of financial position of Onye Nigeria Plc as at October 31, 2020, and an extract from the statement of profit or loss for the year ended on that date.

Onye Nigeria Plc
Statement of Financial Position as at October 31, 2020

Item	2020 (N’000)	2019 (N’000)
Non-current assets
Property, plant and equipment	8,325	6,435
Current assets
Inventories	2,880	2,205
Trade receivables	5,535	4,860
Cash and bank	360	540
Total Assets	17,100	14,040
Equity and Liabilities
Equity
Ordinary share capital	3,600	3,600
Retained earnings	5,603	3,938
Non-current liabilities
10% loan notes	3,600	2,700
Current liabilities
Trade payables	3,375	3,105
Bank overdraft	495	360
Taxation	135	90
Accrued expenses	292	247
Total Equity and Liabilities	17,100	14,040

Onye Nigeria Plc
Extracts from Statement of Profit or Loss for the Year Ended October 31

Item	2020 (N’000)	2019 (N’000)
Revenue	50,400	43,875
Cost of sales	(38,070)	(30,713)
Profit before taxation	2,093	1,440

Additional information:

The profit before tax is after charging:

Item 2020 (N’000) 2019 (N’000)

Depreciation 1,620 1,620

Interest on loan note 360 270

Interest on bank overdraft 68 41

Audit fees 54 45

Item	2020 (N’000)	2019 (N’000)
Depreciation	1,620	1,620
Interest on loan note	360	270
Interest on bank overdraft	68	41
Audit fees	54	45

The latest industry average ratios are as follows:

Ratio	Industry Average
ROCE	18.50%
Net profit margin	4.73%
Gross profit margin	35.23%
Assets turnover	3.91 times
Current ratio	1.90:1
Quick ratio	1.27:1
Trade receivables period	52 days
Trade payables period	49 days
Inventory turnover	18.30 times
Gearing ratio	32.71%

Required:
a. Calculate the above ratios of Onye Nigeria Plc for the years 2019 and 2020. (10 Marks)
b. Analyze the performance and liquidity of Onye Nigeria Plc for the year 2020. (5 Marks)
c. Comment on the limitations of using accounting ratios in financial statement analysis. (5 Marks)

Answer

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Tags: Current Ratio, Financial Ratios, Net Profit Margin, Performance Analysis, ROCE
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2021

FR – Nov 2015 – L2 – Q2 – Financial Statement Analysis

This question requires calculating financial ratios and analyzing Kack Ltd's financial performance and position for the year ended 31 March 2015 compared to the previous year.

Question

Kack Ltd is a listed company that assembles domestic electrical goods which it then sells to both wholesale and retail customers. Kack Ltd’s management was disappointed in the company’s results for the year ended 31 March 2014. In an attempt to improve performance, the following measures were taken early in the year ended 31 March 2015:

A national advertising campaign was undertaken.
Rebates to all wholesale customers purchasing goods above set quantity levels were introduced.
The assembly of certain lines ceased and was replaced by bought-in completed products. This allowed Kack Ltd to dispose of surplus plant.

Kack Ltd’s summarised financial statements for the year ended 31 March 2015 are set out below:

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2015

Description	GHSm
Revenue (25% cash sales)	4,000
Cost of sales	(3,450)
Gross profit	550
Operating expenses	(370)
Operating profit	180
Profit on disposal of plant (note (i))	40
Financial charges	(20)
Profit before tax	200
Income tax expense	(50)
Profit for the year	150

STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2015

Description	GHSm	GHSm
Non-current assets
Property, plant, and equipment (note (ii))	550
Current assets
Inventory	250
Trade receivables	360
Bank	nil
Total current assets	610
Total assets		1,160
Equity and liabilities
Equity
Stated capital (400m shares)	100
Income surplus	380
Total equity		480
Non-current liabilities
8% loan notes	200
Current liabilities
Bank overdraft	10
Trade payables	430
Current tax payables	40
Total current liabilities		480
Total equity and liabilities		1,160

Below are ratios calculated for the year ended 31 March 2014:

Return on year-end capital employed (profit before interest and tax over total assets less current liabilities): 28.1%
Net assets (equal to capital employed) turnover: 4 times
Gross profit margin: 17%
Net profit (before tax) margin: 6.3%
Current ratio: 1.6:1
Closing inventory holding period: 46 days
Trade receivables’ collection period: 45 days
Trade payables’ payment period: 55 days
Dividend yield: 3.75%
Dividend cover: 2 times

Notes:

Kack Ltd received GHS 120 million from the sale of plant that had a carrying amount of GHS 80 million at the date of its sale.
The market price of Kack Ltd’s share throughout the year averaged GHS 3.75 each.
There were no issues or redemption of shares or loans during the year.
Dividends paid during the year ended 31 March 2015 amounted to GHS 90 million, maintaining the same dividend paid in the year ended 31 March 2014.

Required:

a) Calculate ratios for the year ended 31 March 2015 (showing your workings) for Kack Ltd, equivalent to those provided above.
(10 marks)

b) Analyse the financial performance and position of Kack Ltd for the year ended 31 March 2015 compared to the previous year.
(10 marks)
(Total: 20 marks)

Answer

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Tags: Asset Turnover, Current Ratio, Dividend Yield, Financial performance analysis, Inventory holding period, Liquidity, Payables, Profit margin, Ratio Analysis, Receivables, Return on Capital Employed
Level: Level 2

Topic: Financial Statement Analysis
Series: NOV 2015

CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

Question

Atiku Ltd operates in the same business sector as Obi Ltd. The directors of Atiku Ltd would like to understand the firm’s strengths and weaknesses relative to Obi Ltd from the latest financial statements of the two entities as set out below:

Summarised Statements of Profit or Loss for the year ended 30 June 2022:

Net profit figures were arrived at after considering the following items:

Depreciation and amortisation: Atiku Ltd (GH¢3,110), Obi Ltd (GH¢2,850)
Employee benefits: Atiku Ltd (GH¢7,200), Obi Ltd (GH¢6,050)
Finance cost: Atiku Ltd (GH¢1,050), Obi Ltd (GH¢880)
Provision for current tax: Atiku Ltd (GH¢1,004), Obi Ltd (GH¢925)
Deferred tax decrease in provision: Atiku Ltd (GH¢116), Obi Ltd (GH¢55)
Current tax under-provision (2021): Atiku Ltd (nil), Obi Ltd (GH¢32)

Additional information: The following ratios have been extracted from the Directors’ Report accompanying the financial statements:

Gross profit margin: Atiku Ltd (22%), Obi Ltd (25%)
Dividend coverage: Atiku Ltd (4), Obi Ltd (5)
Current share price: Atiku Ltd (GH¢2.10), Obi Ltd (GH¢1.55)

Required:
a) Compute the following ratios for both entities for the year ended 30 June 2022: i) Operating profit margin (1.5 marks)
ii) Return on capital employed (capital employed defined as all interest-bearing liabilities and equity) (1.5 marks)
iii) Inventory turnover period (1.5 marks)
iv) Current ratio (1.5 marks)
v) Capital (long-term) gearing (1.5 marks)
vi) Dividend yield (2.5 marks)

b) Write a report to the Chief Executive Officer analyzing Atiku Ltd’s financial performance and position relative to Obi Ltd, for the year ended 30 June 2022. For the report writing, use only the following ratios: operating profit margin, return on capital employed, capital gearing and dividend yield. (10 marks)

Answer

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Tags: Current Ratio, Dividend Yield, Financial Ratios, Gearing, Inventory Turnover, Profit margin, ROCE
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: MAR 2023

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

Question

a) Garu and Gushegu are two businesses that compete in the same market and have been trading for a number of years. The following information relates to their results for the year ended 31 December 2021:

Account	Garu (GHȼ’000)	Gushegu (GHȼ’000)
Sales	4,455	5,264
Cost of Sales	2,549	2,632
Net Profit	1,075	1,137
Inventory at 1 January	820	518
Inventory at 31 December	1,040	498
Capital Employed	2,428	1,953
Receivables	1,200	1,324
Bank	75	980
Payables	750	720

There are no other current assets or current liabilities.

Required:
Calculate the following ratios for each of the two businesses: i) Return on Capital Employed (ROCE)
ii) Gross Profit Margin
iii) Current Ratio
iv) Liquid (Acid Test) Ratio
v) Inventory Turnover
(10 marks)

b) Using the ratios calculated, discuss which of the two businesses appears to be performing better.
(10 marks)

Answer

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Tags: Acid Test Ratio, Current Ratio, Gross Profit Margin, Inventory Turnover, Ratio Analysis, Return on Capital Employed
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: AUG 2022

FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

Question

The following summary information relates to two businesses, Danyi and Napo. Both businesses traded in the same market sector for the year ended 31 December 2020.

Statement of Profit or Loss Accounts for the year ended 31 December 2020:

Required:
a) Calculate the following ratios for Danyi and Napo:
i) Gross profit margin
ii) Net profit margin
iii) Return on capital employed (ROCE)
iv) Current ratio
v) Liquid (acid test) ratio
vi) Inventory turnover
(6 marks)

b) Use the ratios calculated in a) to assess:
i) The liquidity of both businesses
ii) The profitability of both businesses
(8 marks)

c) Advise management of both Danyi and Napo on the actions they should now take to improve liquidity and profitability.
(6 marks)

Answer

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Tags: Current Ratio, Financial Statement Analysis, Gross Profit Margin, Inventory Turnover, Liquidity Ratio, Net Profit Margin, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: NOV 2021

PM – Nov 2024 – L2 – Q6 – Divisional Performance Measurement

Comparative analysis of Owerri and Isiekenesi event centers based on financial performance metrics

Question

Each event center manager has some independence in operations and earns a performance bonus of 10% of sales if they achieve more than the standard return on capital employed (ROCE) of 50%.

The following financial data is available for the two centers for the years ending December 31, 2020, and 2019:

Additional Information:

Revenue is derived from rentals and ancillary services.
Both centers have a cost of capital of 15%.
Ignore taxation and inflation.

Required:

b. Compute the performance bonus for the centers (if any), showing your workings.
(4 Marks)

c. Briefly outline the role of a Management Accountant in project management.
(4 Marks)

Answer

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Tags: Current Ratio, Gearing Ratio, Interest Cover, Liquidity Ratios, Profit margin, Quick Ratio, Residual Income, ROCE
Level: Level 2

Topic: Divisional Performance Measurement

PM – Nov 2014 – L2 – Q3 – Divisional Performance Measurement

Compare financial performance of Purity Nigeria Ltd. and Benchmark Co. Ltd using key financial ratios and offer strategic improvement recommendations.

Question

Purity Nigeria Limited is a company that produces table water. The company’s board
plans to restructure its operations with the aim of boosting its market share and
profitability.

The financial results of Purity Nigeria Limited and Bench Mark Co. Limited, which is
the leader in the industry, are as follows:

Operating Statements for the year ended 31 December, 2013

Summarised Statements of Financial Position as at 31 December, 2013.

Required:

a. Compute the following performance indices for both companies:
i Profit margin
ii. Asset turnover
iii. Returns On Capital Employed (ROCE)
iv. Current ratio
v. Debt-equity ratio (5 Marks)

b. Compare and analyse the performance of the two companies computed in (a)
above and explain what the board of Purity Nigeria Limited needs to do to
achieve their objectives. (10 Marks)

c. What other non-financial measures can influence the decision of the board of
Purity Nigeria Limited? (5 Marks)

Answer

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Tags: Asset Turnover, Benchmarking, Current Ratio, Debt-equity ratio, Profit margin, ROCE
Level: Level 2

Topic: Divisional Performance Measurement

FR – Nov 2021 – L2 – Q5 – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows using the indirect method and analyze current ratios and overdraft reasons for Dongo Limited.

Question

Dongo Limited statement of profit or loss for the year ended December 31, 2020:

Item	N’000
Revenue	420,000
Cost of goods sold	(99,000)
Gross profit	321,000
Administrative cost	(140,800)
Operating profit	180,200
Investment income	8,100
Interest paid	(17,120)
Profit before taxation	171,180
Income tax expense	(37,000)
Profit for the year	134,180

Dongo Limited statement of financial position as at December 31,

Answer

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Tags: Cash Flows, Current Ratio, Financial Statements, Overdraft Analysis
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)
Series: NOV 2021

FR – Nov 2021 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Calculate and analyze financial ratios for Onye Nigeria Plc for the years 2019 and 2020.

Question

Below are the statements of financial position of Onye Nigeria Plc as at October 31, 2020, and an extract from the statement of profit or loss for the year ended on that date.

Onye Nigeria Plc
Statement of Financial Position as at October 31, 2020

Item	2020 (N’000)	2019 (N’000)
Non-current assets
Property, plant and equipment	8,325	6,435
Current assets
Inventories	2,880	2,205
Trade receivables	5,535	4,860
Cash and bank	360	540
Total Assets	17,100	14,040
Equity and Liabilities
Equity
Ordinary share capital	3,600	3,600
Retained earnings	5,603	3,938
Non-current liabilities
10% loan notes	3,600	2,700
Current liabilities
Trade payables	3,375	3,105
Bank overdraft	495	360
Taxation	135	90
Accrued expenses	292	247
Total Equity and Liabilities	17,100	14,040

Onye Nigeria Plc
Extracts from Statement of Profit or Loss for the Year Ended October 31

Item	2020 (N’000)	2019 (N’000)
Revenue	50,400	43,875
Cost of sales	(38,070)	(30,713)
Profit before taxation	2,093	1,440

Additional information:

The profit before tax is after charging:

Item 2020 (N’000) 2019 (N’000)

Depreciation 1,620 1,620

Interest on loan note 360 270

Interest on bank overdraft 68 41

Audit fees 54 45

Item	2020 (N’000)	2019 (N’000)
Depreciation	1,620	1,620
Interest on loan note	360	270
Interest on bank overdraft	68	41
Audit fees	54	45

The latest industry average ratios are as follows:

Ratio	Industry Average
ROCE	18.50%
Net profit margin	4.73%
Gross profit margin	35.23%
Assets turnover	3.91 times
Current ratio	1.90:1
Quick ratio	1.27:1
Trade receivables period	52 days
Trade payables period	49 days
Inventory turnover	18.30 times
Gearing ratio	32.71%

Answer

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Tags: Current Ratio, Financial Ratios, Net Profit Margin, Performance Analysis, ROCE
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2021

FR – Nov 2015 – L2 – Q2 – Financial Statement Analysis

This question requires calculating financial ratios and analyzing Kack Ltd's financial performance and position for the year ended 31 March 2015 compared to the previous year.

Question

A national advertising campaign was undertaken.
Rebates to all wholesale customers purchasing goods above set quantity levels were introduced.
The assembly of certain lines ceased and was replaced by bought-in completed products. This allowed Kack Ltd to dispose of surplus plant.

Kack Ltd’s summarised financial statements for the year ended 31 March 2015 are set out below:

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2015

Description	GHSm
Revenue (25% cash sales)	4,000
Cost of sales	(3,450)
Gross profit	550
Operating expenses	(370)
Operating profit	180
Profit on disposal of plant (note (i))	40
Financial charges	(20)
Profit before tax	200
Income tax expense	(50)
Profit for the year	150

STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2015

Description	GHSm	GHSm
Non-current assets
Property, plant, and equipment (note (ii))	550
Current assets
Inventory	250
Trade receivables	360
Bank	nil
Total current assets	610
Total assets		1,160
Equity and liabilities
Equity
Stated capital (400m shares)	100
Income surplus	380
Total equity		480
Non-current liabilities
8% loan notes	200
Current liabilities
Bank overdraft	10
Trade payables	430
Current tax payables	40
Total current liabilities		480
Total equity and liabilities		1,160

Below are ratios calculated for the year ended 31 March 2014:

Return on year-end capital employed (profit before interest and tax over total assets less current liabilities): 28.1%
Net assets (equal to capital employed) turnover: 4 times
Gross profit margin: 17%
Net profit (before tax) margin: 6.3%
Current ratio: 1.6:1
Closing inventory holding period: 46 days
Trade receivables’ collection period: 45 days
Trade payables’ payment period: 55 days
Dividend yield: 3.75%
Dividend cover: 2 times

Notes:

Kack Ltd received GHS 120 million from the sale of plant that had a carrying amount of GHS 80 million at the date of its sale.
The market price of Kack Ltd’s share throughout the year averaged GHS 3.75 each.
There were no issues or redemption of shares or loans during the year.
Dividends paid during the year ended 31 March 2015 amounted to GHS 90 million, maintaining the same dividend paid in the year ended 31 March 2014.

Required:

a) Calculate ratios for the year ended 31 March 2015 (showing your workings) for Kack Ltd, equivalent to those provided above.
(10 marks)

b) Analyse the financial performance and position of Kack Ltd for the year ended 31 March 2015 compared to the previous year.
(10 marks)
(Total: 20 marks)

Answer

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Tags: Asset Turnover, Current Ratio, Dividend Yield, Financial performance analysis, Inventory holding period, Liquidity, Payables, Profit margin, Ratio Analysis, Receivables, Return on Capital Employed
Level: Level 2

Topic: Financial Statement Analysis
Series: NOV 2015

CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

Question

Summarised Statements of Profit or Loss for the year ended 30 June 2022:

Net profit figures were arrived at after considering the following items:

Depreciation and amortisation: Atiku Ltd (GH¢3,110), Obi Ltd (GH¢2,850)
Employee benefits: Atiku Ltd (GH¢7,200), Obi Ltd (GH¢6,050)
Finance cost: Atiku Ltd (GH¢1,050), Obi Ltd (GH¢880)
Provision for current tax: Atiku Ltd (GH¢1,004), Obi Ltd (GH¢925)
Deferred tax decrease in provision: Atiku Ltd (GH¢116), Obi Ltd (GH¢55)
Current tax under-provision (2021): Atiku Ltd (nil), Obi Ltd (GH¢32)

Additional information: The following ratios have been extracted from the Directors’ Report accompanying the financial statements:

Gross profit margin: Atiku Ltd (22%), Obi Ltd (25%)
Dividend coverage: Atiku Ltd (4), Obi Ltd (5)
Current share price: Atiku Ltd (GH¢2.10), Obi Ltd (GH¢1.55)

Answer

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Tags: Current Ratio, Dividend Yield, Financial Ratios, Gearing, Inventory Turnover, Profit margin, ROCE
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: MAR 2023

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

Question

Account	Garu (GHȼ’000)	Gushegu (GHȼ’000)
Sales	4,455	5,264
Cost of Sales	2,549	2,632
Net Profit	1,075	1,137
Inventory at 1 January	820	518
Inventory at 31 December	1,040	498
Capital Employed	2,428	1,953
Receivables	1,200	1,324
Bank	75	980
Payables	750	720

There are no other current assets or current liabilities.

b) Using the ratios calculated, discuss which of the two businesses appears to be performing better.
(10 marks)

Answer

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Tags: Acid Test Ratio, Current Ratio, Gross Profit Margin, Inventory Turnover, Ratio Analysis, Return on Capital Employed
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: AUG 2022

FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

Question

The following summary information relates to two businesses, Danyi and Napo. Both businesses traded in the same market sector for the year ended 31 December 2020.

Statement of Profit or Loss Accounts for the year ended 31 December 2020:

b) Use the ratios calculated in a) to assess:
i) The liquidity of both businesses
ii) The profitability of both businesses
(8 marks)

c) Advise management of both Danyi and Napo on the actions they should now take to improve liquidity and profitability.
(6 marks)

Answer

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Tags: Current Ratio, Financial Statement Analysis, Gross Profit Margin, Inventory Turnover, Liquidity Ratio, Net Profit Margin, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: NOV 2021

Question Tag: Current Ratio

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PM – Nov 2024 – L2 – Q6 – Divisional Performance Measurement

Comparative analysis of Owerri and Isiekenesi event centers based on financial performance metrics

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PM – Nov 2014 – L2 – Q3 – Divisional Performance Measurement

Compare financial performance of Purity Nigeria Ltd. and Benchmark Co. Ltd using key financial ratios and offer strategic improvement recommendations.

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FR – Nov 2021 – L2 – Q5 – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows using the indirect method and analyze current ratios and overdraft reasons for Dongo Limited.

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FR – Nov 2021 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Calculate and analyze financial ratios for Onye Nigeria Plc for the years 2019 and 2020.

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FR – Nov 2015 – L2 – Q2 – Financial Statement Analysis

This question requires calculating financial ratios and analyzing Kack Ltd's financial performance and position for the year ended 31 March 2015 compared to the previous year.

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CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

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FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

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FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

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PM – Nov 2024 – L2 – Q6 – Divisional Performance Measurement

Comparative analysis of Owerri and Isiekenesi event centers based on financial performance metrics

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PM – Nov 2014 – L2 – Q3 – Divisional Performance Measurement

Compare financial performance of Purity Nigeria Ltd. and Benchmark Co. Ltd using key financial ratios and offer strategic improvement recommendations.

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FR – Nov 2021 – L2 – Q5 – Statement of Cash Flows (IAS 7)

Prepare a statement of cash flows using the indirect method and analyze current ratios and overdraft reasons for Dongo Limited.

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FR – Nov 2021 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Calculate and analyze financial ratios for Onye Nigeria Plc for the years 2019 and 2020.

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FR – Nov 2015 – L2 – Q2 – Financial Statement Analysis

This question requires calculating financial ratios and analyzing Kack Ltd's financial performance and position for the year ended 31 March 2015 compared to the previous year.

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CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

You're reporting an error for "CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series"

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

You're reporting an error for "FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

You're reporting an error for "FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

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