Past Questions & Answers
- 12 Marks
SCS – Nov 2024 – L3 – Q1a – Charles Handy’s Cultural Types
Discuss the application of Charles Handy's cultural types to BOGML's growth phases and analyze their impact.
Question
Charles Handy identified four distinct categories of corporate culture (cultural stereotypes) that can exist within an organization. Since its formation, BOGML has exhibited all four categories of corporate culture during different phases of its growth.
Required:
Identify and explain the specific and appropriate category of corporate culture applicable, and discuss its impact on the company for each of the following phases of growth when Dr. Ayimadu Baffour:
i) Created the functional departments.
ii) Stated that BOGML is built around him and without him the company will not exist.
iii) Insisted on retaining all authority for decision-making.
iv) Emphasized getting work done through teamwork.
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- Tags: Business Growth, Charles Handy, Decision Making, Leadership, Organizational Culture
- Level: Level 3
- Topic: Competitive Advantage, Internal analysis
- Series: Nov 2024
- 14 Marks
CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration
Evaluating the financial performance of Nsawkaw PLC and addressing challenges of digital technology integration in accounting.
Question
(a) Compute the following ratios for the years ended 2024 & 2023:
i) Operating profit margin
ii) Return on parent’s equity
iii) Earnings per share
iv) Current ratio
v) Trade receivables days
vi) Total liabilities to total assets %
(b) Write a report to the directors of DPEF evaluating the inter-period financial performance and position of NK using the above six (6) ratios. The report should draw attention to how the non-financial metrics combine with the financial counterparts to showcase the prospects and viability of NK. c) The concept of double materiality is relevant to sustainability impacts and dependencies. It
incorporates financial materiality and impact materiality.
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- 6 Marks
CR – Nov 2024 – L3 – Q5a – Financial Analysis and Investment Evaluation
Compute financial ratios for Nsawkaw PLC to evaluate its financial performance for investment recommendation.
Question
Nsawkaw PLC (NK), a gold processing and trading company, has been identified by Djaraye Private Equity Fund (DPEF) as a target for long-term equity investment. As a financial consultant of DPEF, you have been tasked to evaluate the integrated financial condition of NK and make an investment recommendation.
Below are the summarised versions of NK’s Consolidated Financial Statements for the year ended June 30, 2024 (together with its comparative period):
Summarised Consolidated Statement of Profit or Loss for the year ended 30 June 2024
| 2024 (GH¢000) | 2023 (GH¢000) | |
|---|---|---|
| Revenue | 2,538,000 | 2,125,000 |
| Operational expenses | (1,909,100) | (1,592,900) |
| Interest costs | (186,700) | (157,250) |
| Taxation | (234,000) | (198,500) |
| Profit after tax | 208,200 | 176,350 |
| Other comprehensive income | 17,900 | 10,550 |
| Total comprehensive income | 226,100 | 186,900 |
Summarised Consolidated Statement of Changes in Equity for the year ended 30 June 2024
| Equity Holders of the Parent (GH¢000) | Non-controlling Interests’ Equity (GH¢000) | Total Equity (GH¢000) | |
|---|---|---|---|
| 2024 | |||
| Balances b/d | 457,200 | 65,600 | 522,800 |
| Total comprehensive income | 190,800 | 35,300 | 226,100 |
| Dividends | (110,000) | (8,700) | (118,700) |
| Balances c/d | 538,000 | 92,200 | 630,200 |
| 2023 | |||
| Balances b/d | 355,000 | 46,650 | 401,650 |
| Total comprehensive income | 160,500 | 26,400 | 186,900 |
| Dividends | (58,300) | (7,450) | (65,750) |
| Balances c/d | 457,200 | 65,600 | 522,800 |
Summarised Statement of Financial Position as at 30 June 2024
| 2024 (GH¢000) | 2023 (GH¢000) | |
|---|---|---|
| Non-current assets | ||
| Property, plant, and equipment | 718,000 | 657,000 |
| Others | 156,000 | 99,000 |
| Total Non-current assets | 874,000 | 756,000 |
| Current assets | ||
| Trade receivables | 140,000 | 121,000 |
| Others | 236,500 | 123,050 |
| Total Current assets | 376,500 | 244,050 |
| Total Assets | 1,250,500 | 1,000,050 |
| Total Equity and Liability | 1,250,500 | 1,000,050 |
Additional information:
- The total number of equity shares outstanding was 1.2 million and 1.4 million at 30 June 2023 and 30 June 2024 respectively.
- Other comprehensive income attributable to non-controlling interests for the years ended 30 June 2023 and 2024 amounted to GH¢8.05 million and GH¢9.6 million respectively.
- Non-current liabilities at 30 June 2023 and 30 June 2024 amounted to GH¢250,800 and GH¢308,510 respectively.
- The following metrics have been gleaned from NK’s published sustainability reports across the two years:
| Metric | 2024 | 2023 |
|---|---|---|
| Scope 1 & 2 carbon emissions (tonnes of CO2) | 650 | 780 |
| Scope 3 carbon emissions (tonnes of CO2) | 2,400 | 2,380 |
| Women in senior management (%) | 21 | 16 |
| Total recordable injury frequency rate (TRIFR) per 100 full-time workers | 3.3 | 4.1 |
The scope and definitions of the above sustainability measures have remained materially unchanged across the two years.
Required:
Compute the following ratios for the years ended 2024 & 2023:
- Operating profit margin
- Return on parent’s equity
- Earnings per share
- Current ratio
- Trade receivables days
- Total liabilities to total assets %
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- 5 Marks
CR – Nov 2024 – L3 – Q4b – Consolidation and Financial Reporting
Discuss the appropriate reporting figures a parent company should include in its consolidated financial statements when its subsidiaries have different reporting dates.
Question
A parent company has a year-end of 31 December 2023. One of its subsidiaries has a year-end of 30 June 2023, and another has a year-end of 30 September 2023.
Required:
What figures should the parent include in its consolidated financial statements in respect of these subsidiaries?
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- 15 Marks
CR – Nov 2024 – L3 – Q4a – Corporate Reconstruction
Prepare the capital reduction account and the statement of financial position for Mensimah Ltd after reconstruction.
Question
Mensimah LTD (Mensimah) has been experiencing poor trading conditions over the last three years. As a result, it has been difficult to generate revenues and profits in the current year leading to very high inventory levels. Also, Mensimah has defaulted in paying interest due to the loan note holders for two years. Even though the debentures are secured against the land & buildings, the loan note holders have demanded either a scheme of reconstruction or the liquidation of Mensimah.
As the above trading difficulties have significantly threatened the going concern status of Mensimah, the directors as well as representatives of the shareholders and loan holders in a meeting decided to design the following scheme of reconstruction:
-
The assets were independently valued and should now be recognised at the following amounts:
Asset Category Amount (GH¢) Land 64,000 Building 64,000 Plant & Equipment 24,000 Inventory 40,000 The value of Mensimah’s investment in Adams LTD has increased to GH¢48,000 and was to be sold as part of the reconstruction scheme. As for the trade receivables, it was determined that 10% of the stated value is non-recoverable and therefore would be written off.
-
Each GH¢1 equity share is to be redesignated as an equity share of GH¢0.25. After this, the equity shareholders would be persuaded to accept a reduction in the nominal value of their shares from GH¢1 to GH¢0.25 per share and subscribe for a new issue based on one-for-one at a price of GH¢0.30 per share.
-
The existing 5% loan notes are to be exchanged for a new issue of GH¢28,000 9.5% loan notes, repayable in 2028, plus 112,000 equity shares of GH¢0.25 each. In addition, they will subscribe for GH¢7,200 loan notes, repayable in 2028, at par value at the rate of 9.5%.
The 8% loan notes holders who have not received any interest for the past two years, are to receive 16,000 equity shares of GH¢0.25 each in lieu of the interest payable. It is agreed that the value of the interest liability is equivalent to the fair value of the shares to be issued. Moreover, the 8% loan notes holders have agreed to defer repayment of their loan until 2028, on condition that they are paid a higher interest rate of 9.5%.
-
The deficit on retained earnings is to be written off and the bank overdraft is to be repaid immediately.
Mensimah’s statement of financial position as at 31 December 2023 is as follows:
| Assets | GH¢’000 |
|---|---|
| Non-current assets | |
| Land & buildings | 154,597 |
| Plant & equipment | 48,603 |
| Investment in Adams LTD | 21,600 |
| Total Non-Current Assets | 224,800 |
| Current assets | |
| Inventory | 96,198 |
| Receivables | 56,554 |
| Total Current Assets | 152,752 |
| Total Assets | 377,552 |
| Equity & Liabilities | GH¢’000 |
|---|---|
| Equity | |
| Equity shares (GH¢1) | 160,000 |
| Retained earnings | (31,857) |
| Total Equity | 128,143 |
| Non-current liabilities | |
| 8% loan notes | 64,000 |
| 5% loan notes | 56,000 |
| Total Non-Current Liabilities | 120,000 |
| Current liabilities | |
| Trade payables | 89,798 |
| Interest payable | 10,240 |
| Overdraft | 29,371 |
| Total Current Liabilities | 129,409 |
| Total Equity & Liabilities | 377,552 |
Required:
i) Prepare the capital reduction account for Mensimah LTD.
ii) Prepare the statement of Financial Position of Mensimah LTD immediately after the reconstruction.
iii) Determine the position of each stakeholder group if the reconstruction scheme is not implemented.
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- Tags: Capital Reduction, Equity restructuring, Financial Statements, Loan Notes
- Level: Level 3
- Topic: Corporate reconstruction and reorganisation
- Series: Nov 2024
