Find Related Questions by Tags, levels, etc.
Yemi John Plc. (YJ) is planning to raise N30 million in new finance for a major expansion of its existing business and is considering a rights issue, a placing, or an issue of bonds. The corporate objectives of YJ, as stated in its annual report, are to maximize the wealth of its shareholders and to achieve continuous growth in earnings per share. Recent financial information on YJ is as follows:
| Year | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|
| Turnover (Nm) | 28.0 | 24.0 | 19.1 | 16.8 |
| Earnings before interest and tax (EBIT) (Nm) | 9.8 | 8.5 | 7.5 | 6.8 |
| Profit after tax (PAT) (Nm) | 5.5 | 4.7 | 4.1 | 3.6 |
| Dividends (Nm) | 2.2 | 1.9 | 1.6 | 1.6 |
| Ordinary shares (Nm) | 5.5 | 5.5 | 5.5 | 5.5 |
| Reserves (Nm) | 13.7 | 10.4 | 7.6 | 5.1 |
| 8% Bonds, redeemable 2024 (Nm) | 20 | 20 | 20 | 20 |
| Share price (N) | 8.64 | 5.74 | 3.35 | 2.67 |
The par value of the shares of YJ is N1.00 per share. The general level of inflation has averaged 4% per year in the period under consideration. The bonds of YJ are currently trading at their par value of N100. The values for the business sector of YJ are as follows:
EBIT/closing total capital employed
Required:
a. Evaluate the financial performance of YJ, analyzing and discussing the extent to which the company has achieved its stated objectives of:
i. maximizing the wealth of its shareholders; and
ii. achieving continuous growth in earnings per share. (13 Marks)
Note: Up to 8 marks are available for financial analysis.
b. Analyze and discuss the relative merits of a rights issue, a placing, and an issue of bonds as ways of raising finance for the expansion. (7 Marks)
Find Related Questions by Tags, levels, etc.
a. In the context of the selection and holding of investments, discuss each of the following scenarios:
i. An investor holding only one security needs to be concerned with the unsystematic risk of that security. (3 Marks)
ii. However, an investor who holds a number of securities should take account of total risk. (3 Marks)
iii. An investor should never add to a portfolio an investment that yields a return less than the market rate of return. (3 Marks)
b. The equity beta of KT Plc. is 1.2 and the equity alpha is 1.4. Explain the meaning and significance of these values to the company. (6 Marks)
(Total 15 Marks)
Find Related Questions by Tags, levels, etc.
a. The following trial balance was extracted from the books of Adama Plc as at June 30, 2022:
Additional information:
Required: Prepare for Adama PLC the following financial statements:
b. Some new trainee accountants in your organization discussed Earnings Per Share (EPS) and Return on Capital Employed (ROCE) as the best ratios for analyzing an entity’s financial performance. The finance director has requested a memo explaining these ratios and highlighting their limitations.
Required:
Prepare a memo to the finance director explaining the EPS and ROCE ratios and their limitations. (6 Marks)
Find Related Questions by Tags, levels, etc.
Aghobe Air owns a single aircraft which operates between Lagos and Kano. The normal flight schedule is that flights leave Lagos on Mondays and Thursdays and depart from Kano on Wednesdays and Saturdays. Aghobe Air cannot offer any more flights between Lagos and Kano. The only seat available on the aircraft is economy class.
The following information is available: Seating capacity of the aircraft is 360 passengers. Weekly average number of passengers per flight is as follows:
Additional information:
(i) Food and beverages service cost N1,000 per passenger but at no charge to the passengers;
(ii) Commission to travel agents paid by Aghobe Air (All tickets are booked by travel agents) is 8% of fare;
(iii) Fixed annual leased costs allocated to each flight is N2,650,000 per flight;
(iv) Fixed ground services (maintenance, check in baggage handling, etc.) cost allocated to each flight N350,000 per flight;
(v) Fixed flight crew salaries allocated to each flight is N200,000 per flight; and
(vi) Fuel cost is unaffected by the actual number of passengers on the flight.
Required:
a. Determine the net operating income made by Aghobe Air on each one way flight between Lagos and Kano. (5 Marks)
b. The market research unit of Aghobe Air indicates that lowering the average one way fare to N24,000 will increase the average number of passengers per flight to 212. Should Aghobe Air lower its fare? (5 Marks)
c. A tourist group known as Sea Bird Tour Operator approaches Aghobe Air on the possibility of chartering the aircraft twice each month from Lagos to Kano and back from Kano to Lagos. If Aghobe Air accepts the offer, it will only offer 184 flights in each year. Other terms of the offer include:
Should Aghobe Air accept the offer from Sea Bird Tour Operator? (5 Marks)
d. What factors should be taken into consideration in taking the decision in (c) above? (5 Marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Magifera Plc had been trading in merchandise for several years in Garden City. The information below relates to extracts from the Financial Statements for the past two (2) years.
Statement of Profit or Loss and Other Comprehensive Income for the year ended September 30:
| 2016 | 2015 | |
|---|---|---|
| N’ Million | N’ Million | |
| Revenue | 100,000 | 160,000 |
| Gross Profit | 45,000 | 70,000 |
| Administrative Expenses | 22,500 | 27,500 |
| Finance Cost: | ||
| 10% Loan Note Interest | 1,250 | 1,250 |
| 23,750 | 28,750 | |
| Operating Profit Before Tax | 21,250 | 41,250 |
| Less: Taxation Expense | 8,000 | 16,000 |
| Operating Profit for the year | 13,250 | 25,250 |
| Dividends Paid to Equity holders | 6,050 | 8,550 |
Extract of Statement of Financial Position as at September 30
| 2016 | 2015 | |
|---|---|---|
| N’Million | N’Million | |
| Assets: | ||
| Non – Current Assets at Cost | 50,000 | 70,000 |
| Less: Accumulated Depreciation | 10,000 | 12,500 |
| Carrying Amount | 40,000 | 57,500 |
| Current Assets: | ||
| Inventory | 32,500 | 7,500 |
| Trade Receivables | 20,000 | 5,000 |
| Bank Balance | 4,000 | 37,500 |
| 56,500 | 50,000 | |
| Total Assets | 96,500 | 107,500 |
| Equity and Liabilities: | ||
| Ordinary Share Capital @ 50k each | 23,000 | 23,000 |
| Retained Earnings | 17,200 | 10,000 |
| 10% Loan notes | 12,500 | 12,500 |
| 10% Redeemable Preference Shares | _______ | 2,000 |
| 52,700 | 47,500 | |
| Current Liabilities: | ||
| Trade Payables | 7,500 | 10,750 |
| Taxation | 24,000 | 16,000 |
| Bank Overdrafts | 12,300 | 33,250 |
| 43,800 | 60,000 | |
| Total Equity and Liabilities | 96,500 | 107,500 |
The Board of Directors were worried over the dwindling financial performance and precarious financial position of the company. The products are ageing; the economic depression is biting as a result of the worsening exchange rate of $1 to N400. The company imports 60% of the goods sold in Garden City. The worsening exchange rate had affected the company’s importation, consequently the revenue of the company dropped significantly. The unsafe financial performance has also affected the market price of the company’s share which dropped from 12kobo/share in the year ended September 30, 2015 to 8kobo/share in 2016.
You are required to:
a. Calculate the following ratios for the year ended September 30, 2015 and 2016 in columnar form:
i. Return on Capital Employed
ii. Total Assets Turnover
iii. Quick Ratio
iv. Debt- Equity Ratio
v. Fixed Interest Cover
vi. Earnings Yield
vii. Price Earnings Ratio
viii. Dividend Yield (12 Marks)
b. Write a brief and formal technical report to the Board of Directors to assess the performance, liquidity and stability of the Company using only: i. Return on Capital Employed
ii. Total Assets Turnover
iii. Quick Ratio
iv. Fixed Interest Cover
v. Debt Equity Ratio (8 Marks)
Find Related Questions by Tags, levels, etc.
Sekiri Nigeria Limited is a major competitor to Ijor Ventures Limited. Both companies operate in the same industry over the last 20 years.
The summarised financial information of Sekiri Nigeria Limited for the last 2 years is as follows:
Summarised Profit or Loss for the Year Ended September 30:
| Description | 2019 (N’m) | 2018 (N’m) |
|---|---|---|
| Revenue | 4,565 | 4,905 |
| Cost of Sales | (2,950) | (3,225) |
| Gross Profit | 1,615 | 1,680 |
| Selling, Distribution & Admin Expenses | (1,095) | (1,070) |
| Interest Expense | (95) | (75) |
| Net Profit Before Taxation | 425 | 535 |
| Taxation | (225) | (260) |
| Profit for the Year | 200 | 275 |
Statement of Financial Position as at September 30:
| Description | 2019 (N’m) | 2018 (N’m) |
|---|---|---|
| Non-Current Assets: | ||
| Intangible Assets | 240 | 200 |
| Tangible Assets (Carrying Amount) | 1,080 | 1,030 |
| Total Non-Current Assets | 1,320 | 1,230 |
| Current Assets: | ||
| Inventories | 1,470 | 1,515 |
| Trade Receivables | 800 | 705 |
| Bank | 260 | 290 |
| Total Current Assets | 3,850 | 3,740 |
| Total Assets | 5,170 | 4,970 |
Equity & Liabilities:
| Description | 2019 (N’m) | 2018 (N’m) |
|---|---|---|
| Equity | ||
| Ordinary Share Capital | 500 | 500 |
| Retained Earnings | 1,730 | 1,650 |
| Total Equity | 2,230 | 2,150 |
| Non-Current Liabilities | 690 | 690 |
| Current Liabilities: | ||
| Trade Payables | 375 | 375 |
| Other Payables | 555 | 525 |
| Total Liabilities | 3,850 | 3,740 |
Sekiri Nigeria Limited declared dividend of N120m each in years 2018 and 2019
Required:
(a) As the Chief Accountant of Ijor Ventures Limited, write a report to your company’s Finance Director analyzing the performance of Sekiri Nigeria Limited.
(10 Marks)
(b) Highlight FIVE areas that will require further investigation, including reference to other pieces of information that would complement your analysis of the performance of Sekiri Nigeria Limited.
(10 Marks)
Find Related Questions by Tags, levels, etc.
One of the audit testing procedures available to the auditor is the Analytical Review Procedure.
a. Explain what is meant by Analytical Review Procedures. (6 Marks)
b. Explain FOUR types of general Analytical Review Procedures. (4 Marks)
c. What is the purpose of performing Analytical Review Procedures at the audit planning stage? (5 Marks)
Find Related Questions by Tags, levels, etc.
An auditing firm is carrying out an analytical review of the financial transactions of its client, XYZ Manufacturing Company Limited. In order to ascertain the relationship that exists between the company’s annual expenditure and annual income, the following information was extracted from the company’s record for eight different years:
| Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
|---|---|---|---|---|---|---|---|---|
| Expenditure (x) | 30 | 25 | 40 | 35 | 50 | 30 | 55 | 20 |
| Income (y) | 42 | 45 | 55 | 50 | 60 | 40 | 70 | 35 |
You are required to:
i. Calculate the Pearson’s product-moment correlation coefficient between xx and yy. (9 Marks)
ii. Comment on the result in (i). (1 Mark)
(Total: 10 Marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Yemi John Plc. (YJ) is planning to raise N30 million in new finance for a major expansion of its existing business and is considering a rights issue, a placing, or an issue of bonds. The corporate objectives of YJ, as stated in its annual report, are to maximize the wealth of its shareholders and to achieve continuous growth in earnings per share. Recent financial information on YJ is as follows:
| Year | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|
| Turnover (Nm) | 28.0 | 24.0 | 19.1 | 16.8 |
| Earnings before interest and tax (EBIT) (Nm) | 9.8 | 8.5 | 7.5 | 6.8 |
| Profit after tax (PAT) (Nm) | 5.5 | 4.7 | 4.1 | 3.6 |
| Dividends (Nm) | 2.2 | 1.9 | 1.6 | 1.6 |
| Ordinary shares (Nm) | 5.5 | 5.5 | 5.5 | 5.5 |
| Reserves (Nm) | 13.7 | 10.4 | 7.6 | 5.1 |
| 8% Bonds, redeemable 2024 (Nm) | 20 | 20 | 20 | 20 |
| Share price (N) | 8.64 | 5.74 | 3.35 | 2.67 |
The par value of the shares of YJ is N1.00 per share. The general level of inflation has averaged 4% per year in the period under consideration. The bonds of YJ are currently trading at their par value of N100. The values for the business sector of YJ are as follows:
EBIT/closing total capital employed
Required:
a. Evaluate the financial performance of YJ, analyzing and discussing the extent to which the company has achieved its stated objectives of:
i. maximizing the wealth of its shareholders; and
ii. achieving continuous growth in earnings per share. (13 Marks)
Note: Up to 8 marks are available for financial analysis.
b. Analyze and discuss the relative merits of a rights issue, a placing, and an issue of bonds as ways of raising finance for the expansion. (7 Marks)
Find Related Questions by Tags, levels, etc.
a. In the context of the selection and holding of investments, discuss each of the following scenarios:
i. An investor holding only one security needs to be concerned with the unsystematic risk of that security. (3 Marks)
ii. However, an investor who holds a number of securities should take account of total risk. (3 Marks)
iii. An investor should never add to a portfolio an investment that yields a return less than the market rate of return. (3 Marks)
b. The equity beta of KT Plc. is 1.2 and the equity alpha is 1.4. Explain the meaning and significance of these values to the company. (6 Marks)
(Total 15 Marks)
Find Related Questions by Tags, levels, etc.
a. The following trial balance was extracted from the books of Adama Plc as at June 30, 2022:
Additional information:
Required: Prepare for Adama PLC the following financial statements:
b. Some new trainee accountants in your organization discussed Earnings Per Share (EPS) and Return on Capital Employed (ROCE) as the best ratios for analyzing an entity’s financial performance. The finance director has requested a memo explaining these ratios and highlighting their limitations.
Required:
Prepare a memo to the finance director explaining the EPS and ROCE ratios and their limitations. (6 Marks)
Find Related Questions by Tags, levels, etc.
Aghobe Air owns a single aircraft which operates between Lagos and Kano. The normal flight schedule is that flights leave Lagos on Mondays and Thursdays and depart from Kano on Wednesdays and Saturdays. Aghobe Air cannot offer any more flights between Lagos and Kano. The only seat available on the aircraft is economy class.
The following information is available: Seating capacity of the aircraft is 360 passengers. Weekly average number of passengers per flight is as follows:
Additional information:
(i) Food and beverages service cost N1,000 per passenger but at no charge to the passengers;
(ii) Commission to travel agents paid by Aghobe Air (All tickets are booked by travel agents) is 8% of fare;
(iii) Fixed annual leased costs allocated to each flight is N2,650,000 per flight;
(iv) Fixed ground services (maintenance, check in baggage handling, etc.) cost allocated to each flight N350,000 per flight;
(v) Fixed flight crew salaries allocated to each flight is N200,000 per flight; and
(vi) Fuel cost is unaffected by the actual number of passengers on the flight.
Required:
a. Determine the net operating income made by Aghobe Air on each one way flight between Lagos and Kano. (5 Marks)
b. The market research unit of Aghobe Air indicates that lowering the average one way fare to N24,000 will increase the average number of passengers per flight to 212. Should Aghobe Air lower its fare? (5 Marks)
c. A tourist group known as Sea Bird Tour Operator approaches Aghobe Air on the possibility of chartering the aircraft twice each month from Lagos to Kano and back from Kano to Lagos. If Aghobe Air accepts the offer, it will only offer 184 flights in each year. Other terms of the offer include:
Should Aghobe Air accept the offer from Sea Bird Tour Operator? (5 Marks)
d. What factors should be taken into consideration in taking the decision in (c) above? (5 Marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Magifera Plc had been trading in merchandise for several years in Garden City. The information below relates to extracts from the Financial Statements for the past two (2) years.
Statement of Profit or Loss and Other Comprehensive Income for the year ended September 30:
| 2016 | 2015 | |
|---|---|---|
| N’ Million | N’ Million | |
| Revenue | 100,000 | 160,000 |
| Gross Profit | 45,000 | 70,000 |
| Administrative Expenses | 22,500 | 27,500 |
| Finance Cost: | ||
| 10% Loan Note Interest | 1,250 | 1,250 |
| 23,750 | 28,750 | |
| Operating Profit Before Tax | 21,250 | 41,250 |
| Less: Taxation Expense | 8,000 | 16,000 |
| Operating Profit for the year | 13,250 | 25,250 |
| Dividends Paid to Equity holders | 6,050 | 8,550 |
Extract of Statement of Financial Position as at September 30
| 2016 | 2015 | |
|---|---|---|
| N’Million | N’Million | |
| Assets: | ||
| Non – Current Assets at Cost | 50,000 | 70,000 |
| Less: Accumulated Depreciation | 10,000 | 12,500 |
| Carrying Amount | 40,000 | 57,500 |
| Current Assets: | ||
| Inventory | 32,500 | 7,500 |
| Trade Receivables | 20,000 | 5,000 |
| Bank Balance | 4,000 | 37,500 |
| 56,500 | 50,000 | |
| Total Assets | 96,500 | 107,500 |
| Equity and Liabilities: | ||
| Ordinary Share Capital @ 50k each | 23,000 | 23,000 |
| Retained Earnings | 17,200 | 10,000 |
| 10% Loan notes | 12,500 | 12,500 |
| 10% Redeemable Preference Shares | _______ | 2,000 |
| 52,700 | 47,500 | |
| Current Liabilities: | ||
| Trade Payables | 7,500 | 10,750 |
| Taxation | 24,000 | 16,000 |
| Bank Overdrafts | 12,300 | 33,250 |
| 43,800 | 60,000 | |
| Total Equity and Liabilities | 96,500 | 107,500 |
The Board of Directors were worried over the dwindling financial performance and precarious financial position of the company. The products are ageing; the economic depression is biting as a result of the worsening exchange rate of $1 to N400. The company imports 60% of the goods sold in Garden City. The worsening exchange rate had affected the company’s importation, consequently the revenue of the company dropped significantly. The unsafe financial performance has also affected the market price of the company’s share which dropped from 12kobo/share in the year ended September 30, 2015 to 8kobo/share in 2016.
You are required to:
a. Calculate the following ratios for the year ended September 30, 2015 and 2016 in columnar form:
i. Return on Capital Employed
ii. Total Assets Turnover
iii. Quick Ratio
iv. Debt- Equity Ratio
v. Fixed Interest Cover
vi. Earnings Yield
vii. Price Earnings Ratio
viii. Dividend Yield (12 Marks)
b. Write a brief and formal technical report to the Board of Directors to assess the performance, liquidity and stability of the Company using only: i. Return on Capital Employed
ii. Total Assets Turnover
iii. Quick Ratio
iv. Fixed Interest Cover
v. Debt Equity Ratio (8 Marks)
Find Related Questions by Tags, levels, etc.
Sekiri Nigeria Limited is a major competitor to Ijor Ventures Limited. Both companies operate in the same industry over the last 20 years.
The summarised financial information of Sekiri Nigeria Limited for the last 2 years is as follows:
Summarised Profit or Loss for the Year Ended September 30:
| Description | 2019 (N’m) | 2018 (N’m) |
|---|---|---|
| Revenue | 4,565 | 4,905 |
| Cost of Sales | (2,950) | (3,225) |
| Gross Profit | 1,615 | 1,680 |
| Selling, Distribution & Admin Expenses | (1,095) | (1,070) |
| Interest Expense | (95) | (75) |
| Net Profit Before Taxation | 425 | 535 |
| Taxation | (225) | (260) |
| Profit for the Year | 200 | 275 |
Statement of Financial Position as at September 30:
| Description | 2019 (N’m) | 2018 (N’m) |
|---|---|---|
| Non-Current Assets: | ||
| Intangible Assets | 240 | 200 |
| Tangible Assets (Carrying Amount) | 1,080 | 1,030 |
| Total Non-Current Assets | 1,320 | 1,230 |
| Current Assets: | ||
| Inventories | 1,470 | 1,515 |
| Trade Receivables | 800 | 705 |
| Bank | 260 | 290 |
| Total Current Assets | 3,850 | 3,740 |
| Total Assets | 5,170 | 4,970 |
Equity & Liabilities:
| Description | 2019 (N’m) | 2018 (N’m) |
|---|---|---|
| Equity | ||
| Ordinary Share Capital | 500 | 500 |
| Retained Earnings | 1,730 | 1,650 |
| Total Equity | 2,230 | 2,150 |
| Non-Current Liabilities | 690 | 690 |
| Current Liabilities: | ||
| Trade Payables | 375 | 375 |
| Other Payables | 555 | 525 |
| Total Liabilities | 3,850 | 3,740 |
Sekiri Nigeria Limited declared dividend of N120m each in years 2018 and 2019
Required:
(a) As the Chief Accountant of Ijor Ventures Limited, write a report to your company’s Finance Director analyzing the performance of Sekiri Nigeria Limited.
(10 Marks)
(b) Highlight FIVE areas that will require further investigation, including reference to other pieces of information that would complement your analysis of the performance of Sekiri Nigeria Limited.
(10 Marks)
Find Related Questions by Tags, levels, etc.
One of the audit testing procedures available to the auditor is the Analytical Review Procedure.
a. Explain what is meant by Analytical Review Procedures. (6 Marks)
b. Explain FOUR types of general Analytical Review Procedures. (4 Marks)
c. What is the purpose of performing Analytical Review Procedures at the audit planning stage? (5 Marks)
Find Related Questions by Tags, levels, etc.
An auditing firm is carrying out an analytical review of the financial transactions of its client, XYZ Manufacturing Company Limited. In order to ascertain the relationship that exists between the company’s annual expenditure and annual income, the following information was extracted from the company’s record for eight different years:
| Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
|---|---|---|---|---|---|---|---|---|
| Expenditure (x) | 30 | 25 | 40 | 35 | 50 | 30 | 55 | 20 |
| Income (y) | 42 | 45 | 55 | 50 | 60 | 40 | 70 | 35 |
You are required to:
i. Calculate the Pearson’s product-moment correlation coefficient between xx and yy. (9 Marks)
ii. Comment on the result in (i). (1 Mark)
(Total: 10 Marks)
Find Related Questions by Tags, levels, etc.
Elevate your professional expertise across key business domains with our comprehensive training programs
Follow us on our social media and get daily updates.
This feature is only available in selected plans.
Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.
If you’re not subscribed to a plan, click on the button below to choose a plan