Question Tag: Performance Analysis

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  • 20 Marks

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.

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:

  1. 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
  2. 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)

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  • 20 Marks

CR – May 2020 – Q5 – Financial Performance and Position of Bossman Ltd

This question involves analyzing the financial performance and position of Bossman Ltd over three years using ratio analysis.

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  • 20 Marks

FR – Dec 2022 – L2 – Q4 – Financial Analysis & Ratios

Analyze and compare Madina Ltd.’s performance using key financial ratios for the years 2020 and 2021, including comparisons with industry standards.

Madina Ltd is engaged in the processing of palm fruits to produce palm oil and palm kernel oil. The financial statements of the company for the years ended 31st December 2020 and 2021 are as follows:

Statement of Profit or Loss for the year ended

Description 2021 (GH¢’000) 2020 (GH¢’000)
Revenue 123,817 95,620
Cost of sales (84,940) (76,240)
Net gains from changes in fair value of biological assets 84 754
Gross profit 38,961 20,134
Administrative expenses (11,727) (8,494)
Other income 1,267 927
Operating profit 28,501 12,567
Finance income 888 508
Profit before income tax 29,389 13,075
Income tax expense (4,692) (3,422)
Profit for the year 24,697 9,653

Statement of Financial Position as at:

Description 2021 (GH¢’000) 2020 (GH¢’000)
Non-current assets
Property, Plant & Equipment 57,909 49,471
Financial assets 5,221 5,137
Current assets
Inventories 8,490 9,370
Trade Receivables 24,663 18,304
Cash and cash equivalents 22,832 10,618
Total Assets 119,115 92,900

The following ratios have been gathered from the food and processing industry for the year ended 31 December 2021:

  • Return on Equity (%) 23.52
  • Gross Profit Margin (%) 29.57
  • Net Profit Margin (%) 22.16
  • Current Ratio (times) 2.5
  • Acid Test Ratio (times) 1.8
  • Inventory Turnover (days) 20
  • Trade Receivables Collection (days) 68
  • Trade Payables Settlement (days) 32

Required:
Write a report to the Board of Directors of Madina Ltd, assessing the company’s performance for the year ended 31 December 2021 in relation to the industry and the comparative year.

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  • 15 Marks

FR – MAY 2021 – L2 – Q4a – Performance Analysis

Analyze Zeus Ltd's performance and position from 2018 to 2020, including calculations.

You are the Financial Controller of Konka Ltd. Zeus Ltd is a competitor in the same industry, and it has been operating for 20 years. Summaries of Zeus Ltd’s statements of profit or loss and financial position for the previous three years are given below.

Summarised Statement of Profit or Loss For the year ended 31 December

2018 2019 2020
Revenue 840 981 913
Cost of sales (554) (645) (590)
Gross profit 286 336 323
Administration and selling expenses (186) (214) (219)
Profit before interest and taxes 100 122 104
Finance cost (6) (15) (19)
Profit before taxation 94 107 85
Taxation (45) (52) (45)
Profit after taxation 49 55 40
Dividends 24 24 24

Summarised Statement of Financial Position as at 31 December

2018 2019 2020
Assets
Non-current assets
Intangible assets 36 40 48
Tangible assets at net book value 176 206 216
Total Non-current assets 212 246 264
Current assets
Inventories 237 303 294
Receivables 105 141 160
Bank 52 58 52
Total Current Assets 394 502 506
Total Assets 606 748 770
Equity and Liabilities
Equity
Stated capital 100 100 100
Retained earnings 299 330 346
Total Equity 399 430 446
Non-current liabilities
Long-term loans 74 138 138
Current liabilities
Trade payables 53 75 75
Other payables 80 105 111
Total Current Liabilities 133 180 186
Total Equity and Liabilities 606 748 770

Required:
a) Analyzing the performance and position of Zeus Ltd and showing any calculations in an appendix to this report.
(15 marks)

 

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  • 5 Marks

FR – MAY 2021 – L2 – Q4b – Areas Requiring Further Investigation

Identify five areas needing further investigation regarding Zeus Ltd's performance.

Summarising FIVE (5) areas that require further investigation, including reference to other pieces of information which would complement your analysis of the performance of Zeus Ltd.

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  • 20 Marks

FR – July 2023 – L2 – Q4 – Performance Analysis

Assess the financial performance of Besease Ltd using financial ratios and prepare a report for the board of directors.

Besease Ltd won two prestigious awards in 2020 despite the negative impact of the COVID-19 pandemic. The Board of Directors seeks to assess the company’s performance for the year ended 31 December 2021 in comparison to 2020.

Below are the financial statements for the year ended 31 December 2021:

Statement of comprehensive income for the year ended 31 December

2021 (GH¢) 2020 (GH¢)
Revenue 7,315,927 6,184,754
Cost of sales (4,322,986) (3,441,339)
Gross profit 2,992,941 2,743,415
Other income 330,812 280,832
Administrative expenses (2,511,179) (2,648,987)
Operating profit 812,574 375,260
Finance cost (496,913) (174,872)
Profit before tax 315,661 200,388
Taxation (188,621) (30,700)
Profit for the year 127,040 169,688

Statement of financial position as at 31 December

2021 (GH¢) 2020 (GH¢)
Non-current assets
Property, Plant & Equipment 9,224,988 5,102,799
Intangible assets 35,824 33,350
Investments 36,629 36,629
Total non-current assets 9,297,441 5,172,778
Current assets
Inventories 2,878,337 1,329,279
Trade receivables 1,875,594 2,246,747
Cash and bank balances 527,412 372,081
Total current assets 5,281,343 3,948,107
Total assets 14,578,784 9,120,885
Equity & Liabilities
Equity
Share capital 217,467 217,467
Retained earnings 1,289,140 1,162,100
Credit reserve 826,528 1,102,037
Total equity 2,333,135 2,481,604
Non-current liabilities
Interest-bearing loans 6,708,598 2,800,223
Deferred taxation 187,624 186,304
Total non-current liabilities 6,896,222 2,986,527
Current liabilities
Trade payables 1,257,693 1,550,466
Taxation 118,337 101,391
Other payables 2,993,667 1,021,167
Accrued expenses 979,730 979,730
Total current liabilities 5,349,427 3,652,754
Total equity & liabilities 14,578,784 9,120,885

The Finance Manager has selected the following performance ratios:
i) Return on capital employed (capital employed = interest-bearing debt + shareholders’ equity) (%)
ii) Return on equity (%)
iii) Acid test ratio (times)
iv) Debt-to-equity ratio
v) Interest cover ratio (times)

Required:
Write a report to the Board of Directors assessing the comparative performance of Besease Ltd for the year ended 31 December 2021 using the given ratios.

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  • 20 Marks

FR – Nov 2021 – L2 – Q4 -Financial Statement Analysis

Analysis of financial ratios and performance of Bebebe Ltd for 2019 and 2020.

The following are the accounts of Bebebe Ltd (Bebebe), a company that manufactures playground equipment for the year ended 30 November 2020.

Statement of Comprehensive Income for the year ended 30 November:

Required:

a) Calculate, for both years, the return on equity and the return on capital employed. (4 marks)

b) Calculate, for both years, TWO (2) investment ratios to a potential investor. (4 marks)

c) Calculate, for both years, TWO (2) ratios of interest to a potential long-term lender. (4 marks)

d) Comment on the performance of Bebebe to a potential shareholder and lender using the ratios calculated above. (5 marks)

e) Explain THREE (3) weaknesses in these ratios.

(3 marks)

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  • 20 Marks

CR – Aug 2022 – L3 – Q5 – Analysis and interpretation of financial statements

This question requires writing a report that assesses the comparative performance of a company using various financial ratios (profitability, liquidity, efficiency, and gearing).

Wadie Ltd has been in operation for the past ten years. The company started operations in Kumasi with just three employees, but currently operates in all regions of Ghana, with over five hundred employees.

The final meeting for the year of the Board of Directors of the company is to be convened, and as a tradition, the Finance Manager presented an analysis of the financial performance of the company for the financial year ended 31 December 2021. Below are the financial statements for the year ended 31 December 2021:

Statement of Comprehensive Income for the year 31 December

Additional Information:

i) Finance income relates to interest earned on the company’s investment in Government of Ghana loan notes.

ii) Dividend payable represents the dividend declared or approved by shareholders at the last Annual General Meeting.

Required:

As the Finance Manager of the company, write a report to the Board of Directors, assessing the comparative performance of the company for the year ended 31 December 2021. Your report should use THREE (3) profitability ratios, TWO (2) liquidity ratios, THREE (3) efficiency ratios, and TWO (2) gearing ratios.

 

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  • 20 Marks

CR – Nov 2019 – L3 – Q5 – Analysis and Interpretation of Financial Statements

Analyze the financial performance of Pep Ltd over the past three years and recommend areas for further investigation.

You are the Financial Controller of Oxtom Ltd. Pep Ltd is a competitor in the same industry and has been operating for 20 years. Summaries of Pep Ltd’s Statements of Profit or Loss and Financial Position for the previous three years are given below:

Pep Ltd – Summarised Statement of Profit or Loss for the year ended 31 December

Item 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Revenue 840 981 913
Cost of sales (554) (645) (590)
Gross profit 286 336 323
Selling, distribution, and admin expenses (186) (214) (219)
Profit before interest and taxes 100 122 104
Finance cost (6) (15) (19)
Profit before taxation 94 107 85
Taxation (45) (52) (45)
Profit after taxation 49 55 40
Dividends 24 24 24

Pep Ltd – Summarised Statement of Financial Position as at 31 December

Item 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Assets
Non-current assets
Intangible assets 36 40 48
Tangible assets (net) 176 206 216
Total non-current assets 212 246 264
Current assets
Inventories 237 303 294
Receivables 105 141 160
Bank 52 58 52
Total current assets 394 502 506
Total assets 606 748 770
Equity and Liabilities 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Equity
Stated capital 100 100 100
Retained earnings 299 330 346
Total equity 399 430 446
Non-current liabilities
Long-term loans 74 138 138
Current liabilities
Trade payables 53 75 75
Other payables 80 105 111
Total equity and liabilities 606 748 770

Required:
a) Write a report to the Chief Executive Officer of Oxtom Ltd analyzing the performance of Pep Ltd, showing any calculations in an appendix to the report. (14 marks)
b) Summarize THREE (3) areas which require further investigation, including reference to other pieces of information that would complement your analysis of Pep Ltd’s performance. (6 marks)

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  • 5 Marks

MA – Aug 2022 – L2 – Q4b – Other aspects of performance measurement

This question discusses the relationship between conformance and non-conformance costs using data from Mante Ltd.

Mante Ltd is reviewing its progress toward meeting its objective of having a reputation for producing high-quality products. Extracts from the company’s records for each of the years ended 31 October 2020 and 2021 are shown below.

Description 2021 2020
% of units rejected by customers 15% 21%
% of units rejected before delivery 15% 5%
Cost as % of revenue:
Raw material inspection 10% 3%
Training 7% 4%
Preventive machine maintenance 8% 2%
Machine breakdown maintenance 4% 11%
Finished goods inspection 8% 2%

Required:
Discuss, using the above data, the relationship between conformance costs and non-conformance costs and its importance to Mante Ltd.

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  • 20 Marks

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.

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:

  1. 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
  2. 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)

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  • 20 Marks

CR – May 2020 – Q5 – Financial Performance and Position of Bossman Ltd

This question involves analyzing the financial performance and position of Bossman Ltd over three years using ratio analysis.

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  • 20 Marks

FR – Dec 2022 – L2 – Q4 – Financial Analysis & Ratios

Analyze and compare Madina Ltd.’s performance using key financial ratios for the years 2020 and 2021, including comparisons with industry standards.

Madina Ltd is engaged in the processing of palm fruits to produce palm oil and palm kernel oil. The financial statements of the company for the years ended 31st December 2020 and 2021 are as follows:

Statement of Profit or Loss for the year ended

Description 2021 (GH¢’000) 2020 (GH¢’000)
Revenue 123,817 95,620
Cost of sales (84,940) (76,240)
Net gains from changes in fair value of biological assets 84 754
Gross profit 38,961 20,134
Administrative expenses (11,727) (8,494)
Other income 1,267 927
Operating profit 28,501 12,567
Finance income 888 508
Profit before income tax 29,389 13,075
Income tax expense (4,692) (3,422)
Profit for the year 24,697 9,653

Statement of Financial Position as at:

Description 2021 (GH¢’000) 2020 (GH¢’000)
Non-current assets
Property, Plant & Equipment 57,909 49,471
Financial assets 5,221 5,137
Current assets
Inventories 8,490 9,370
Trade Receivables 24,663 18,304
Cash and cash equivalents 22,832 10,618
Total Assets 119,115 92,900

The following ratios have been gathered from the food and processing industry for the year ended 31 December 2021:

  • Return on Equity (%) 23.52
  • Gross Profit Margin (%) 29.57
  • Net Profit Margin (%) 22.16
  • Current Ratio (times) 2.5
  • Acid Test Ratio (times) 1.8
  • Inventory Turnover (days) 20
  • Trade Receivables Collection (days) 68
  • Trade Payables Settlement (days) 32

Required:
Write a report to the Board of Directors of Madina Ltd, assessing the company’s performance for the year ended 31 December 2021 in relation to the industry and the comparative year.

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  • 15 Marks

FR – MAY 2021 – L2 – Q4a – Performance Analysis

Analyze Zeus Ltd's performance and position from 2018 to 2020, including calculations.

You are the Financial Controller of Konka Ltd. Zeus Ltd is a competitor in the same industry, and it has been operating for 20 years. Summaries of Zeus Ltd’s statements of profit or loss and financial position for the previous three years are given below.

Summarised Statement of Profit or Loss For the year ended 31 December

2018 2019 2020
Revenue 840 981 913
Cost of sales (554) (645) (590)
Gross profit 286 336 323
Administration and selling expenses (186) (214) (219)
Profit before interest and taxes 100 122 104
Finance cost (6) (15) (19)
Profit before taxation 94 107 85
Taxation (45) (52) (45)
Profit after taxation 49 55 40
Dividends 24 24 24

Summarised Statement of Financial Position as at 31 December

2018 2019 2020
Assets
Non-current assets
Intangible assets 36 40 48
Tangible assets at net book value 176 206 216
Total Non-current assets 212 246 264
Current assets
Inventories 237 303 294
Receivables 105 141 160
Bank 52 58 52
Total Current Assets 394 502 506
Total Assets 606 748 770
Equity and Liabilities
Equity
Stated capital 100 100 100
Retained earnings 299 330 346
Total Equity 399 430 446
Non-current liabilities
Long-term loans 74 138 138
Current liabilities
Trade payables 53 75 75
Other payables 80 105 111
Total Current Liabilities 133 180 186
Total Equity and Liabilities 606 748 770

Required:
a) Analyzing the performance and position of Zeus Ltd and showing any calculations in an appendix to this report.
(15 marks)

 

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  • 5 Marks

FR – MAY 2021 – L2 – Q4b – Areas Requiring Further Investigation

Identify five areas needing further investigation regarding Zeus Ltd's performance.

Summarising FIVE (5) areas that require further investigation, including reference to other pieces of information which would complement your analysis of the performance of Zeus Ltd.

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  • 20 Marks

FR – July 2023 – L2 – Q4 – Performance Analysis

Assess the financial performance of Besease Ltd using financial ratios and prepare a report for the board of directors.

Besease Ltd won two prestigious awards in 2020 despite the negative impact of the COVID-19 pandemic. The Board of Directors seeks to assess the company’s performance for the year ended 31 December 2021 in comparison to 2020.

Below are the financial statements for the year ended 31 December 2021:

Statement of comprehensive income for the year ended 31 December

2021 (GH¢) 2020 (GH¢)
Revenue 7,315,927 6,184,754
Cost of sales (4,322,986) (3,441,339)
Gross profit 2,992,941 2,743,415
Other income 330,812 280,832
Administrative expenses (2,511,179) (2,648,987)
Operating profit 812,574 375,260
Finance cost (496,913) (174,872)
Profit before tax 315,661 200,388
Taxation (188,621) (30,700)
Profit for the year 127,040 169,688

Statement of financial position as at 31 December

2021 (GH¢) 2020 (GH¢)
Non-current assets
Property, Plant & Equipment 9,224,988 5,102,799
Intangible assets 35,824 33,350
Investments 36,629 36,629
Total non-current assets 9,297,441 5,172,778
Current assets
Inventories 2,878,337 1,329,279
Trade receivables 1,875,594 2,246,747
Cash and bank balances 527,412 372,081
Total current assets 5,281,343 3,948,107
Total assets 14,578,784 9,120,885
Equity & Liabilities
Equity
Share capital 217,467 217,467
Retained earnings 1,289,140 1,162,100
Credit reserve 826,528 1,102,037
Total equity 2,333,135 2,481,604
Non-current liabilities
Interest-bearing loans 6,708,598 2,800,223
Deferred taxation 187,624 186,304
Total non-current liabilities 6,896,222 2,986,527
Current liabilities
Trade payables 1,257,693 1,550,466
Taxation 118,337 101,391
Other payables 2,993,667 1,021,167
Accrued expenses 979,730 979,730
Total current liabilities 5,349,427 3,652,754
Total equity & liabilities 14,578,784 9,120,885

The Finance Manager has selected the following performance ratios:
i) Return on capital employed (capital employed = interest-bearing debt + shareholders’ equity) (%)
ii) Return on equity (%)
iii) Acid test ratio (times)
iv) Debt-to-equity ratio
v) Interest cover ratio (times)

Required:
Write a report to the Board of Directors assessing the comparative performance of Besease Ltd for the year ended 31 December 2021 using the given ratios.

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  • 20 Marks

FR – Nov 2021 – L2 – Q4 -Financial Statement Analysis

Analysis of financial ratios and performance of Bebebe Ltd for 2019 and 2020.

The following are the accounts of Bebebe Ltd (Bebebe), a company that manufactures playground equipment for the year ended 30 November 2020.

Statement of Comprehensive Income for the year ended 30 November:

Required:

a) Calculate, for both years, the return on equity and the return on capital employed. (4 marks)

b) Calculate, for both years, TWO (2) investment ratios to a potential investor. (4 marks)

c) Calculate, for both years, TWO (2) ratios of interest to a potential long-term lender. (4 marks)

d) Comment on the performance of Bebebe to a potential shareholder and lender using the ratios calculated above. (5 marks)

e) Explain THREE (3) weaknesses in these ratios.

(3 marks)

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  • 20 Marks

CR – Aug 2022 – L3 – Q5 – Analysis and interpretation of financial statements

This question requires writing a report that assesses the comparative performance of a company using various financial ratios (profitability, liquidity, efficiency, and gearing).

Wadie Ltd has been in operation for the past ten years. The company started operations in Kumasi with just three employees, but currently operates in all regions of Ghana, with over five hundred employees.

The final meeting for the year of the Board of Directors of the company is to be convened, and as a tradition, the Finance Manager presented an analysis of the financial performance of the company for the financial year ended 31 December 2021. Below are the financial statements for the year ended 31 December 2021:

Statement of Comprehensive Income for the year 31 December

Additional Information:

i) Finance income relates to interest earned on the company’s investment in Government of Ghana loan notes.

ii) Dividend payable represents the dividend declared or approved by shareholders at the last Annual General Meeting.

Required:

As the Finance Manager of the company, write a report to the Board of Directors, assessing the comparative performance of the company for the year ended 31 December 2021. Your report should use THREE (3) profitability ratios, TWO (2) liquidity ratios, THREE (3) efficiency ratios, and TWO (2) gearing ratios.

 

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  • 20 Marks

CR – Nov 2019 – L3 – Q5 – Analysis and Interpretation of Financial Statements

Analyze the financial performance of Pep Ltd over the past three years and recommend areas for further investigation.

You are the Financial Controller of Oxtom Ltd. Pep Ltd is a competitor in the same industry and has been operating for 20 years. Summaries of Pep Ltd’s Statements of Profit or Loss and Financial Position for the previous three years are given below:

Pep Ltd – Summarised Statement of Profit or Loss for the year ended 31 December

Item 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Revenue 840 981 913
Cost of sales (554) (645) (590)
Gross profit 286 336 323
Selling, distribution, and admin expenses (186) (214) (219)
Profit before interest and taxes 100 122 104
Finance cost (6) (15) (19)
Profit before taxation 94 107 85
Taxation (45) (52) (45)
Profit after taxation 49 55 40
Dividends 24 24 24

Pep Ltd – Summarised Statement of Financial Position as at 31 December

Item 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Assets
Non-current assets
Intangible assets 36 40 48
Tangible assets (net) 176 206 216
Total non-current assets 212 246 264
Current assets
Inventories 237 303 294
Receivables 105 141 160
Bank 52 58 52
Total current assets 394 502 506
Total assets 606 748 770
Equity and Liabilities 2016 (GH¢’m) 2017 (GH¢’m) 2018 (GH¢’m)
Equity
Stated capital 100 100 100
Retained earnings 299 330 346
Total equity 399 430 446
Non-current liabilities
Long-term loans 74 138 138
Current liabilities
Trade payables 53 75 75
Other payables 80 105 111
Total equity and liabilities 606 748 770

Required:
a) Write a report to the Chief Executive Officer of Oxtom Ltd analyzing the performance of Pep Ltd, showing any calculations in an appendix to the report. (14 marks)
b) Summarize THREE (3) areas which require further investigation, including reference to other pieces of information that would complement your analysis of Pep Ltd’s performance. (6 marks)

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  • 5 Marks

MA – Aug 2022 – L2 – Q4b – Other aspects of performance measurement

This question discusses the relationship between conformance and non-conformance costs using data from Mante Ltd.

Mante Ltd is reviewing its progress toward meeting its objective of having a reputation for producing high-quality products. Extracts from the company’s records for each of the years ended 31 October 2020 and 2021 are shown below.

Description 2021 2020
% of units rejected by customers 15% 21%
% of units rejected before delivery 15% 5%
Cost as % of revenue:
Raw material inspection 10% 3%
Training 7% 4%
Preventive machine maintenance 8% 2%
Machine breakdown maintenance 4% 11%
Finished goods inspection 8% 2%

Required:
Discuss, using the above data, the relationship between conformance costs and non-conformance costs and its importance to Mante Ltd.

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