- 9 Marks
FM – May 2023 – L3 – Q5a – Strategic Performance Measurement
Evaluate TAXIM Plc’s financial performance in achieving profit growth, EPS growth, and shareholder return objectives.
Question
The following financial information relates to TAXIM Plc, a listed company:
| Year | 2021 | 2020 | 2019 |
|---|---|---|---|
| Profit before interest and tax (₦m) | 18.3 | 17.7 | 17.1 |
| Profit after tax (₦m) | 12.8 | 12.4 | 12.0 |
| Dividends (₦m) | 5.1 | 5.1 | 4.8 |
| Equity market value (₦m) | 56.4 | 55.2 | 54.0 |
TAXIM Plc has 12 million ordinary shares in issue and has not issued any new shares in the period under review. The company is financed entirely by equity.
The annual report of TAXIM Plc states that the company has three financial objectives:
- Objective 1: To achieve growth in profit before interest and tax of 4% per year.
- Objective 2: To achieve growth in earnings per share of 3.5% per year.
- Objective 3: To achieve total shareholder return of 5% per year.
TAXIM Plc has a cost of equity of 12% per year.
Required:
Analyse and discuss the extent to which TAXIM Plc has achieved each of its stated objectives. (9 Marks)
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