- 20 Marks
FR – March 2023 – L2 – Q4 – Financial Statement Analysis
Analyze and compare the financial performance of Boomu Ltd and Sintim Ltd using profitability, liquidity, efficiency, and gearing ratios.
Question
Boomu Ltd is an agro-processing company with strong competition from Sintim Ltd. The Board of Directors of Boomu Ltd wants to measure the performance of the company against its competitor. Below are the statement of comprehensive income of the two companies for the year ended 31 December 2021, and the statement of financial positions as at that date.
Statement of Comprehensive Income:
| Boomu Ltd (GH¢000) | Sintim Ltd (GH¢000) | |
|---|---|---|
| Revenue | 619,085 | 956,200 |
| Cost of Sales | (424,700) | (762,400) |
| Gross Profit | 194,385 | 193,800 |
| Administrative Expenses | (58,635) | (84,940) |
| Other Income | 6,335 | 9,270 |
| Operating Profit | 142,085 | 118,130 |
| Finance Cost | – | (3,000) |
| Profit Before Income Tax | 142,085 | 115,130 |
| Income Tax Expense | (23,460) | (34,220) |
| Profit for the Year | 118,625 | 80,910 |
Statement of Financial Position:
| Boomu Ltd (GH¢000) | Sintim Ltd (GH¢000) | |
|---|---|---|
| Non-Current Assets | ||
| Property, Plant & Equipment | 231,636 | 197,884 |
| Intangible Assets | 105,320 | 111,928 |
| Total Non-Current Assets | 336,956 | 309,812 |
| Current Assets | ||
| Inventories | 33,960 | 37,480 |
| Trade Receivables | 26,216 | 3,836 |
| Cash and Cash Equivalents | 91,328 | 42,472 |
| Total Current Assets | 151,504 | 83,788 |
| Total Assets | 488,460 | 393,600 |
Equity & Liabilities:
| Boomu Ltd (GH¢000) | Sintim Ltd (GH¢000) | |
|---|---|---|
| Equity | ||
| Share Capital | 20,000 | 30,000 |
| Retained Earnings | 390,536 | 283,820 |
| Total Equity | 410,536 | 313,820 |
| Non-Current Liabilities | ||
| Deferred Taxation | 18,120 | 13,948 |
| 20% Loan Notes | – | 30,000 |
| Total Non-Current Liabilities | 18,120 | 43,948 |
| Current Liabilities | ||
| Trade and Other Payables | 42,904 | 28,040 |
| Current Tax | 16,900 | 7,792 |
| Total Current Liabilities | 59,804 | 35,832 |
| Total Equity & Liabilities | 488,460 | 393,600 |
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 using THREE (3) profitability ratios, TWO (2) liquidity ratios, THREE (3) efficiency ratios, and TWO (2) gearing ratios.
Find Related Questions by Tags, levels, etc.
- Tags: Competitor Comparison, Efficiency, Financial Performance, Gearing, Liquidity, Profitability, Ratio Analysis
- Level: Level 2
- Topic: Financial Statement Analysis
- Series: MAR 2023