Question Tag: Financial Analysis

Search 500 + past questions and counting.

CML – OCT 2022 – L3 – Q1 – Lending to Iron Rod Manufacturing Company

Evaluate a request for GHC 3.0 million working capital finance from a long-term customer manufacturing iron rods, aiming to supply government projects, considering eroded profits and provided financials.

Question

Joojo Metals Ltd… has been your customer for the past twenty years. The company manufactures iron rods used in the construction of roads and houses and supplies wholesalers in Accera, Akim Oda, Nkawkaw, Nsawam and its environs.

The company sources its raw materials of iron scraps and ingons both locally and abroad, withThe company hasThe company has has been its profits eroded in 20221 due to the rapidly depreciating exchange rate of the cedi against foreigni currencies. The company has also faced increasing competition from other producers in Accera and Takorardi as well as cheaper imports from China China.

Joojo Banful owns $60%$ of the shares of the the company, whilst the remaining $ 40%$ is held by his childhood friend Fifii Awotwe who takes no active part in the management of the company.

Joojo serves as the CEO and General Manager of the company, whilst his wife, Mama Nelson, a chartered accountant serves as the Finance Director of the company. His factory Manager is Jonas Dadzzie, aged 62, a vastly experienced factory manager he recruited only a year ago. In addition, he has a pool of twenty skilled workers many of whom were poached from other companies.

The principal shareholder of the company, Joojo Banful is a noted supporter of the ruling government though he persistently denies that he has provided funding for the government.

The company’s factory is located at Tema in the Greater Accera Region of the country on a wide expanse of land. It is fitted with three huge warehouses, which are well stocked at all times. The company also has three articulator trucks which it uses for its supplies.

Jonas comes to you with a business proposition involving the provision of working capital finance for the supply of of iron rods to major government building construction projects running across the country. He tells you that this could give the business a major breakthrough and bring gains also to your bank. He is asking for working capital finance of GHC 3.0 million for this major expansion in scope of operations.

How would you respond to this proposition with respect to the provided financial statements and ratios on pages 3.4 & 5?

Profit and Loss Extracts for the year ending 30 Dec

Ratios

2019

2020

2021

[30 Marks]

Answer

Find Related Questions by Tags, levels, etc.

Tags: Competition, Exchange Rate Risks, Financial Analysis, Government Contracts, lending proposition, Manufacturing, Working Capital
Level: Level 3

Topic: Understanding the requirements of different types of business such as manufacturing
Series: OCT 2022

FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

Question

As the Credit Officer for TCB Bank, Alpha Technology Solutions Limited has submitted its financial statements as part of the process to secure a loan of GHS 5million. You are required to:
i. Compute the following ratios for 2021 and 2020.
• Gross Profit Margin
• Return on Capital Employed
• Acid Test Ratio
• Payable period
• Debt to equity

ii. Write a report to the Head of Credit analyzing the performance of the company for the 2020 and 2021. Your report should explain the ratios and analyze them in relation to the previous year.

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
NON-CURRENT ASSETS
Property, Plant and Equipment	438,631	428,210
Fixed Deposit	–	400,000
Total Non-Current Assets	438,631	828,210
CURRENT ASSETS
Inventories	2,284,401	2,409,650
Accounts Receivable	2,712,529	1,368,010
Cash on Hand and Bank	642,951	2,177,519
Total Current Assets	5,639,881	5,955,179
TOTAL ASSETS	6,078,512	6,783,389

	2021 (GHS)	2020 (GHS)
LIABILITIES AND SHAREHOLDERS’ EQUITY
NON-CURRENT LIABILITIES
Loans	115,484	115,484
Deferred Tax	18,127	22,110
Total Non-Current Liabilities	133,611	137,594
CURRENT LIABILITIES
Accounts Payable	1,843,574	2,869,489
Current Tax	30,512	129,464
Total Current Liabilities	1,874,086	2,998,953
Total Liabilities	2,007,697	3,136,547
SHAREHOLDERS’ EQUITY
Stated Capital	1,240,000	1,240,000
Retained Earnings	2,830,815	2,406,842
Total Shareholders’ Equity	4,070,815	3,646,842
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	6,078,512	6,783,389

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
Revenue	11,180,208	12,957,649
Direct Cost	(7,446,676)	(9,703,650)
Gross Profit	3,733,532	3,253,999
Other Income	–	23,436
Administrative Expenses	(3,168,234)	(2,483,480)
Operating Profit	565,298	793,955
Income Tax Expense	(141,325)	(198,489)
Profit/(Loss) After Taxation	423,973	595,466

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acid Test Ratio, Banking Sector, Credit Officer, Debt to Equity, Financial Analysis, Gross Profit Margin, Payable Period, Report Writing, ROCE
Level: Level 3

Topic: FINANCIAL REPORTING, PLANNING AND ANALYSIS
Series: APR 2023

CML – APRIL 2023 – L3 – Q3 – Critical Examination of Agro-Processing Equipment Finance

Critically examine a USD 540,000 equipment purchase request from Pistashio Cashew Nuts Ltd, using background and financials (exchange rate GHC13/USD).

Question

Pistashio Cashew Nuts Ltd. is a producer of roasted cashew nuts for sale in the local and international markets. The company was established fifteen years ago by Professor Joel Amo, a professor in Agriculture at the University of Ghana with some support from his expatriate friend Mr. Peter Deitrich, a German national. Mr. Deitrich aged 75 is an experienced industrialist with vast experience in many agro-based outfits. He serves as the Board Director of the Company. Mr. Joel aged 70 also serves as the CEO and COO for the business.

Mrs. Amo aged 65 a seasoned chartered accountant serves as the CFO and Head of HR for the company. She joined the company five years ago when she retired as Head of Internal Audit for Bank of Ghana.

Mr. Kweku Dadzie aged 68 has served as the factory manager for the company since his retirement from Gold Coast Aluminum Works as factory supervisor eight years ago.

The company is embarking on an expansion project in order to meet the burgeoning demand for its product which is selling very fast on the international market as well as the local market. The company supplies roasted cashew to a number of hotels and supermarkets in the country (about 40% of its output and exports the rest to UK, France, Greenland USA and South America.

The company has a state of the art factory located at Ada a few miles drive from Tema. Your visit to the premises show that the machinery in use are rather aged which Joel explains as the reason for the fast deterioration in account performance over the past year.

The customer tells you he has received an increase in orders from overseas which makes it imperative to procure a larger set of cashew roasting and packaging equipment. He shows you an invoice for a set costing in total USD 540,000 including equipment cost, transportation costs and installation costs. (USD exchange rate is GHC13.00/USD)

Critically examine this proposition using the information above and the related financial statements provided below.

Pisticashio Cashew Nuts Ltd Profit and Loss Extracts for the year ending 31 Dec

	2020 GHC	2021 GHC	2022 GHC
Sales	1,850,000	2,571,500	3,985,825
Opening Inventory	245,000	289,000	442,800
Purchases & Production	1,239,500	1,748,620	2,790,078
	1,484,500	2,037,620	3,232,878
Closing Inventory	289,000	442,800	770,500
Cost of Sales	1,195,500	1,594,820	2,462,378
Gross Profit	654,500	976,680	1,523,447
Overheads	175,000	298,000	476,800
Depreciation	259,000	312,400	372,400
Operating Profit	220,500	366,280	674,247
Interest Paid	125,000	145,000	158,000
Profit Before Tax	95,500	221,280	516,247
Tax	23,875	55,320	129,062
Profit After Tax	71,625	165,960	387,185

Noncurrent Assets	2020	2021	2022
Building	684,000	831,600	929,200
Plant & Machinery	360,000	240,000	390,000
Motor Vehicles	270,000	380,000	360,000
Furniture and Fixtures	110,000	160,000	110,000
Total	1,424,000	1,611,600	1,789,200
Current Assets
Inventory	289,000	442,800	770,500
Receivables	258,000	254,700	574,000
Prepayments	25,600	36,800	47,800
Bank	125,000	85,400	75,800
	697,600	819,700	1,468,100
Current Liabilities
Trade Creditors	148,000	184,700	435,200
Overdraft	854,900	1,544,920	1,426,827
Total Current Liabilities	1,002,900	1,729,620	1,862,027
Net Current Assets	-305,300	-909,920	-393,927
Net Assets	1,118,700	701,680	1,395,273
Capital
Share Capital	1,000,000	500,000	1,000,000
Income Surplus	118,700	201,680	395,273
	1,118,700	701,680	1,395,273

Ratios

	2020	2021	2022
Sales Growth		39.00%	55.00%
Receivable Days	51	36	53
Payable Days	44	39	57
Inventory Turnover Days	88	101	114
Gross Margin	35%	38%	38%
Overhead %	9%	12%	12%
Net Margin	5%	9%	13%
Interest Cover	1.76	2.53	4.27
Current Ratio	0.70	0.47	0.79
Quick Ratio	0.41	0.22	0.37
Tax Rate	25%	25%	25%
Dividend Payout RATIO	50%	50%	50%
Inventory to Sales	16%	17%	19%
Receivables to Sales	14%	10%	14%
Payables to Sales	8%	7%	11%

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agro Industry, Credit Decision, Equipment Finance, Export risks, Financial Analysis, Ratio Assessment
Level: Level 3

Topic: Accounting interpretation for lending
Series: APR 2023

CML – APRIL 2023 – L3 – Q2 – Critical Examination of Restaurant Property Acquisition Loan

Critically examine a loan request from Aduane Restaurants and Mobile Food Ltd for 80% financing (GHC 640,000) of a new premises purchase, using company background and financials.

Question

Aduane Restaurants and Mobile Food Ltd. has operated an account with us for the past ten years since the inception of the company. The company has ten restaurants located at strategic parts of Accra, two at Takoradi and two in Kumasi.

The CEO of the company Mr. Sampson Arthur has come to see you for a discussion about the future of the company. Due to road construction, his key head office restaurant branch located at East Legon is no longer viable. He has identified another premises located close to the center of Accra which he wishes to acquire. According to him the vendors, who are siblings who inherited the property from their deceased parents, wish to dispose of the property in order to avoid unnecessary disputes among themselves. The property is also a bit dilapidated and would need to be overhauled. The company has been given a favourable price of GHC 800,000.00 to facilitate a quick sale. The company is able to provide 20% of the purchase and is asking the bank to finance the difference.

The company provides services primarily to workers within their vicinity. The company has become a household name due to the quality of their food and services. The company has a fleet of vans which assist in the delivery, one van for each branch. The ambience of their premises is also attractive and their restaurants are always milling with clientele mostly bank staff, civil servants and staff of private companies, at lunch time. They are also a favorite choice for wedding and other social occasions.

Their bank account operations however declined due to the onset of Covid and its impact on workers having to work from home. You have nonetheless discerned a slight improvement in their operations from the current bank account operations.

Management team comprises, Mr. Samson Arthur, aged 46, Chairman and CEO of the Company, Mrs. Mary Arthur, aged 45, COO and Chief Matron of the company and Mr. Kweku Johnson, aged 32 CFO of the company. Mr., Samson Arthur is a graduate in Economics from University of Ghana Legon and an MBA in Marketing. He worked in one of the top banks in the country for ten years prior to his resigning to take over his aged mother’s restaurant. Mrs. Mary Arthur, his wife has a degree in Food Science and Nutrition from the Ho University. She served as a matron at Wesley Grammar High School prior to joining the company at its inception. Kweku Johnson is a close family friend of the CEO and holds a Diploma in Accounting from the University of Professional Studies, Accra. Prior to joining the company Kweku worked at the Labone Polyclinic as an accounts staff.

Each branch has a manager and a chief cook, supported by two matrons. In addition, they hire waiters and waitresses on temporary basis and put them through some rigorous training before deploying them.

Critically examine this proposition as per information above and the related financial statements below.

Aduane Restaurant and Mobile Food Ltd Profit and Loss Extracts for the year ending 31st Dec

	2020 GHC	2021 GHC	2022 GHC
Sales	1,899,500	2,796,460	3,215,929
Opening Inventory	204,570	321,215	503,363
Production cost	968,945	1,482,124	1,768,761
	1,173,515	1,803,339	2,272,124
Closing Inventory	321,215	503,363	643,186
Cost of Sales	852,300	1,299,976	1,628,938
Gross Profit	1,047,200	1,496,484	1,586,991
Overheads	44,880	235,386	268,292
Depreciation	131,000	162,500	256,500
Operating Profit	871,320	1,098,598	1,062,199
Interest Paid	38,000	54,000	102,000
Profit Before Tax	833,320	1,044,598	960,199
Tax	208,330	261,150	240,050
Profit After Tax	624,990	783,449	720,149

Noncurrent Assets	2020	2021	2022
Building	615,000	600,000	585,000
Equipment	75,000	118,500	232,000
Motor Vehicles	210,000	200,000	395,000
Furniture and Fixtures	114,000	123,000	118,000
Total	1,014,000	1,041,500	1,330,000
Current Assets
Inventory	321,215	503,363	643,186
Receivables	445,880	701,150	1,010,560
Prepayment	19,250	45,210	55,610
Bank	15,000	14,800	25,600
	801,345	1,264,523	1,734,956
Current Liabilities
Trade Payables	322,915	531,327	675,345
Overdraft	125,000	15,542	270,382
Total Current Liabilities	447,915	546,869	945,727
Net Current Assets	353,430	717,654	789,229
Net Assets	1,367,430	1,759,154	2,119,229
Financed by
Capital
Share Capital	800,000	800,000	800,000
Income Surplus	567,430	959,154	1,319,229
	1,367,430	1,759,154	2,119,229

Ratios

	2020	2021	2022
Sales Growth		47.22%	15.00%
Receivable Days	86	92	115
Payable Days	122	131	139
Inventory Turnover Days	138	141	144
Gross Margin	55%	54%	49%
Overhead %	2%	8%	8%
Net Margin	43.87%	37.35%	29.86%
Interest Cover	22.93	20.34	10.41
Current Ratio	1.79	2.31	1.83
Quick Ratio	1.07	1.39	1.15
Tax Rate	25%	25%	25%
Inventory to Sales	17%	18%	20%
Receivables to Sales	23%	25%	31%
Payables to Sales	17%	19%	21%
Gearing	9.14%	0.88%	12.76%
Dividend Payout Ratio	50%	50%	50%

Answer

Find Related Questions by Tags, levels, etc.

Tags: Credit risk, Financial Analysis, Loan Structuring, Property Finance, Ratio Trends, Restaurant Sector
Level: Level 3

CML – APRIL 2023 – L3 – Q1 – Gold Coast Shipping Company Ltd Financing Proposition

Critically examine the financing proposition from Gold Coast Shipping Company Ltd for a USD 2.0 million down payment on a new ship, using provided company background, operations, and financial statements for 2020-2022.

Question

Mr. Bampoh Humphrey is the Board Chairman and CEO of Gold Coast Shipping Company Ltd. He owns 80 percent of the shares of the company with his foreign Partner Jones Smith, a retired Chairman of Elder Dempster Shipping Company owning the remaining 20%.

The two shareholders acquired the company from the Divestiture Implementation Committee in 1995 when the government divested its shareholding in the national shipping line the Black Star Line. Mr. Bampoh is known to be highly connected with the government in power at the time of AFC.

The company is engaged in transportation of primary products such as bauxite, gold and manganese ore from the country abroad and the transportation of consumer goods in container ships throughout the world.

The company has a fleet of ten cargo ships and ten container ships. It has three main offices located in Tema, Takoradi and London in the UK.

The company has operated an impressive account with you since the acquisition of the national shipping line, until in recent times when you noticed a sharp deterioration in its account operations. Following your painstaking investigation you established that the company incurred a huge loss when a cargo of bauxite was diverted on the high seas and the goods stolen. The ship was later discovered to have been sunken in the high seas to hide the evidence. Another problem you observed was that their fleet was becoming aged and one of them needs immediate replacement.

Each office of the company has an Office Manager all of whom are experienced expatriate shipping managers poached from international shipping companies.

The cost of purchase and delivery of one ship is estimated at USD 5.0 million, and the company is requesting for financial support from the bank to make a down payment of USD 2.0 million for the ship. The company proposes to pay the bank over a period of five years whilst the remainder of the cost of the ship is to be paid over the next period of ten years.

Critically examine this proposition using the information above and the related financial statements provided below.

Gold Star Shipping Ltd Statement of Comprehensive Income as at 31 Dec 2020 GHC

Total Revenue Cost of Revenue Gross Profit Overheads Depreciation Operating Profit Interest Paid Profit Before Tax Tax Profit After Tax 2021 GHC 13,700,000 6,165,000 7,535,000 1,575,500 1,337,000 4,622,500 480,000 4,142,500 1,035,625 3,106,875 2021 GHC 14,400,000 6,912,000 7,488,000 1,843,200 1,514,000 4,130,800 352,000 3,778,800 944,700 2,834,100 2022 GHC 14,920,000 7,758,400 7,161,600 2,333,488 1,564,000 3,264,112 312,500 2,951,612 737,903 2,213,709

Gold Star Shipping Ltd Balance Sheet as at 31st Dec

Noncurrent Assets	2020	2021	2022
Building	147,000	238,000	327,000
Equipment	9,000,000	11,325,000	10,150,000
Motor Vehicles	720,000	480,000	432,000
Furniture and Fixtures	350,000	260,000	170,000
Total	10,217,000	12,303,000	11,079,000
Current Assets
Inventory	135,000	185,000	197,000
Receivables	245,000	254,000	1,998,000
Prepayments	146,200	158,400	268,700
Bank	950,800	241,250	746,805
	1,477,000	838,650	3,210,505
Current Liabilities
Trade Payables	125,000	135,600	156,400
Overdraft	45,000	65,000	85,200
Total Current	170,000	200,600	241,600
Liabilities
Net Current Assets	1,307,000	638,050	2,968,905
Net Assets	11,524,000	12,941,050	14,047,905
Capital
Share Capital	10,000,000	10,000,000	10,000,000
Income Surplus	1,524,000	2,941,050	4,047,905
	11,524,000	12,941,050	14,047,905

RATIOS 2020 2021 2022

Sales Growth 5.11% 3.61%

Receivable Days 7 6 49

Payable Days 7 7 7

Inventory Turnover Days 8 10 9

Gross Margin 55% 52% 48%

Overhead % 12% 13% 16%

Net Margin 30.24% 26.24% 19.78%

Interest Cover 9.63 11.74 10.45

Current Ratio 8.69 4.18 13.29

Quick Ratio 7.89 3.26 12.47

Tax Rate 25% 25% 25%

Dividend Payout RATIO 50% 50% 50%

Inventory to Sales 0.01 0.01 0.01

Receivables to Sales 0.01 0.01 0.13

Payables to Sales 0.01 0.01 0.01

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cargo Loss Impact, Financial Analysis, Fleet Replacement, lending proposition, Risk Assessment, Security Requirements, Shipping Company
Level: Level 3

CML – APRIL 2024 – LEVEL 3 – Q1 – BA Brazil Nuts Ltd Lending Proposition

Critically examine a request from BA Brazil Nuts Ltd for an overdraft increase to GHC10 million and a USD 500,000 term loan for new equipment, considering their financials, operations, and recent challenges like a fire outbreak.

Question

Your valued customers of twenty years, BA Brazil Nuts Ltd was established twenty-six years ago by Herbert Obeng, aged 62 and his wife Martha Obeng, aged 58, both graduates in Agricultural Engineering from the University of Science, Industry and Technology. They also have MBA certificates in Marketing. Prior to this, they both worked with the Gold Coast Food Production and Distribution Service, a State Corporation engaged in the cultivation, purchase and distribution of food supplies. Herbert serves as both Board Chairman and CEO of the company. He is also in charge of Farming Operations. The Farm Managers at the company’s farms report directly to Herbert. Martha serves as the CFO and Executive in charge of Marketing. She is supported by an Accounts Clerk, Jones Pino, aged 25 who has just completed his professional examination in Accounting. ICA (Ghana). The company also has a pool of skilled workers poached from other reputable industrial establishments.

The company is located at Ekumfi Swedru in the Central Region of the country and boasts of a state of the art Brazil nut production plant and a five storey office building. The company has two articulator trucks which are used in the carting of the Brazil nuts to the ports for export. The company is engaged in the production, roasting, packing and export of processed Brazil nuts primarily to the EU and Great Britain which take 60% of its products. The rest is sold locally (20%) and to other parts of the world (20%) including Australia and the US.

The company has operated an impressive account over the years until a year ago when you saw a sharp dip in the company’s turnover. In your interaction with Herbert, you learnt that there had been a fire outbreak which affected a significant part of the company’s farm holdings in the Bono Region of the country. He had to replenish his stock of Brazil nuts at a higher cost from his colleagues who also have farms in this part of the country. Your latest investigations show that the company has replanted the burnt area with Brazil nut seedlings.

In one of your visits, it came to your attention that Herbert was building a new factory at Winneba about eighty (80) kilometers away. When you queried him, he told you he was anticipating expanding his market in US and Australia.

The company’s Overdraft Facility of GHC 5,000,000.00 is showing a hard core at around GHC 3,000,000.00. The company is requesting for:

An increase in the Overdraft Facility to GHC10 million in support of Working Capital.
A Term Loan of USD 500,000 for the purchase of new Brazil Nut Roasting and Packaging Plant for the new factory. GHS/USD = GHS 13.5/USD1

Critically examine this proposition. [30 MARKS] BA Brazil Nuts Ltd. Profit and Loss Extracts for the year ending 31 Dec

2021	2022	2023
GHC	GHC	GHC
5,750,000	6,900,000	7,690,000
472,610	534,100	758,420
3,150,000	4,142,000	4,605,800
3,622,610	4,676,100	5,364,220
534,100	758,420	985,400
3,088,510	3,917,680	4,378,820
2,661,490	2,982,320	3,311,180
690,000	779,700	991,580
405,000	417,400	777,400
1,566,490	1,785,220	1,542,200
439,600	574,000	684,500
1,126,890	1,211,220	857,700
281,723	302,805	214,425
845,167	908,415	643,275

BA Brazil Nuts Ltd. Balance Sheet as at 31 Dec

Ratios 2021 2022 2023 Sales Growth

20.00%

11.45%

Receivable Days

112

141

Payable Days

Inventory Turnover Days

Gross Margin

46%

43%

Overhead %

12%

11%

13%

Answer

Find Related Questions by Tags, levels, etc.

Tags: agricultural engineering, expansion risks, export business, Financial Analysis, fire outbreak risk, lending proposition, overdraft increase, Risk Assessment, Term Loan, Working Capital
Level: Level 3

Topic: Farming
Series: APR 2024

TAI – Aug 2020 – L1 – Q4 – Audit Review and Reporting

Recommend examination procedures for reviewing God’s Time Ltd.’s profit forecast for COVID-19 financial assistance.

Question

In order to assist businesses during the COVID-19 period, the Government of Ghana has announced various packages including financial assistance to various companies and other Small and Medium Enterprises. Your firm, Prosper & Co has been approached to perform an assurance engagement for God’s Time Ltd; the engagement will be a review of prospective financial information which is needed to support the company’s application for financial assistance provided under COVID-19 facilities. God’s Time Ltd had its financial year ended 31st December each year.

The operating profit forecast for the two years to 31st December 2020 prepared by a member of the accounting team of God’s Time Ltd is shown below, along with some accompanying notes.

	Six months to 30th June 2019	Six months to 31st Dec. 2019	Six months to 30 June. 2020	Six months to 31st Dec. 2020
	GH¢	GH¢	GH¢	GH¢
Earnings	2,801,597	3,088,680	4,210,265	4,429,728
Direct costs	2,135,938	2,315,746	3,413,711	3,618,584
Gross Profit	665,659	772,934	796,554	811,144
Operating Exp.
Wages & Salaries	168,452	184,864	209,546	218,762
Advertising	13,840	20,542	28,548	31,540
Design costs	21,580	32,456	50,452	43,546
Marketing	10,896	12,458	16,520	34,450
Interest on Loan	45,543	48,620	51,654	60,542
Other Operating Exp	266,264	309,173	318,622	324,458
Net Profit	139,084	164,821	121,212	97,846

Additional Notes: i. God’s Time Ltd is a producer of greetings cards and giftware; the demand for which is seasonal in nature.

ii. Design costs are mostly payroll costs of the staff working in the company’s design team, and the costs relate to the design and development of new product ranges.

iii. The total ‘Other expenses’ is calculated based on 40% of the projected revenue for the six-month period.

iv. In 2019, the company was granted a loan facility to complete the ongoing factory project.

Required:

Recommend the examination procedures which should be used in the review of the profit forecast. (B)

You are the supervisor in-charge of the audit of Titi bidi Construction Company Limited. The audit of the company is near completion, and you are finalizing the audit report. As part of your final review, you want a confirmation that, the tax liability as reported is accurate and as such there is no liability that has not been captured.

Required:

Outline the audit steps to verify that, all tax payments and tax credits has been captured and the liability as reported is accurate.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance Engagement, Audit Procedures, COVID-19 Assistance, Financial Analysis, Ghana Revenue Authority, Profit Forecast
Level: Level 1

Topic: Audit Review and Reporting, Revenue Inquiry and Financial Analysis
Series: AUGUST 2020

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

Question

(a) You are a tax audit team leader responsible for the audit of Mina Macarthy Limited.

Mina Macarthy Limited owns a block of flats and earns its income through rentals and general dealing. On 1st January 2019, the ledger accounts of the company included the following balances.

Debtors’ account GH¢475,000

Provision for doubtful debts account GH¢ 42,235

The balance on the provision account consisted of the following: GH¢

Specific provision of 100% against the debt of Charles Sulemana, a tenant 31,500

General provision of 1% against remaining debts
12,235

During the year ended 31st December 2019, the following events occurred.

i. Charles Sulemana paid Mina Macarthy GH¢11,150 and then vanished without trace to new world, leaving no assets.

ii. Another tenant, Antonio Banderas, who owed GH¢3,900 fell into a river and was also found to have died penniless.

iii. Azuma Nickson returned from total obscurity and paid an amount of GH¢6,450 which Mina Macarthy Ltd had written off in 2017.

iv. Credit sales for the year amounted to GH¢8,167,400 and cash received from debtors (other than Sulemana and Azuma) totaled GH¢3,150,000

v. On 31st December 2019, Mina Macarthy Ltd decided to provide in full against a disputed debt of GH¢51,200 owed by Kwesi Otoo Pratt, and to maintain the 1% general provision on other debtors.

Additional notes

The company has submitted its returns for 2019 which showed a profit before tax of GH¢375,650.

Required: Comment on the matters to be considered. In addition to your comments, explain the audit evidence expected to be obtained during your review of Mina Macarthy Limited’s audit working papers prepared by the audit team member in respect of each of the issues described above. (bi)

In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

i. Explain how a bad debt may arise for VAT.

(bii) In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

ii. Explain the circumstances under which a bad debt relief can be claimed.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Audit Review, Bad Debts, Debtors, Financial Analysis, Provisions, Tax Audit, Tax Compliance, VAT
Level: Level 1

Topic: Audit Review and Reporting, Tax Audits and Investigations
Series: AUGUST 2020

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.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compliance, Cybersecurity, Digital Transformation, Ethics, Financial Analysis, Ratio Analysis
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements, Beyond financial reporting
Series: Nov 2024

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 %

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Analysis, Investment Decision, Leverage, Liquidity, Profitability, Ratio Analysis, Working Capital Management
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: Nov 2024

CML – OCT 2022 – L3 – Q1 – Lending to Iron Rod Manufacturing Company

Evaluate a request for GHC 3.0 million working capital finance from a long-term customer manufacturing iron rods, aiming to supply government projects, considering eroded profits and provided financials.

Question

Joojo Banful owns $60%$ of the shares of the the company, whilst the remaining $ 40%$ is held by his childhood friend Fifii Awotwe who takes no active part in the management of the company.

The principal shareholder of the company, Joojo Banful is a noted supporter of the ruling government though he persistently denies that he has provided funding for the government.

How would you respond to this proposition with respect to the provided financial statements and ratios on pages 3.4 & 5?

Profit and Loss Extracts for the year ending 30 Dec

Ratios

2019

2020

2021

[30 Marks]

Answer

Find Related Questions by Tags, levels, etc.

Tags: Competition, Exchange Rate Risks, Financial Analysis, Government Contracts, lending proposition, Manufacturing, Working Capital
Level: Level 3

Topic: Understanding the requirements of different types of business such as manufacturing
Series: OCT 2022

FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

Question

ii. Write a report to the Head of Credit analyzing the performance of the company for the 2020 and 2021. Your report should explain the ratios and analyze them in relation to the previous year.

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
NON-CURRENT ASSETS
Property, Plant and Equipment	438,631	428,210
Fixed Deposit	–	400,000
Total Non-Current Assets	438,631	828,210
CURRENT ASSETS
Inventories	2,284,401	2,409,650
Accounts Receivable	2,712,529	1,368,010
Cash on Hand and Bank	642,951	2,177,519
Total Current Assets	5,639,881	5,955,179
TOTAL ASSETS	6,078,512	6,783,389

	2021 (GHS)	2020 (GHS)
LIABILITIES AND SHAREHOLDERS’ EQUITY
NON-CURRENT LIABILITIES
Loans	115,484	115,484
Deferred Tax	18,127	22,110
Total Non-Current Liabilities	133,611	137,594
CURRENT LIABILITIES
Accounts Payable	1,843,574	2,869,489
Current Tax	30,512	129,464
Total Current Liabilities	1,874,086	2,998,953
Total Liabilities	2,007,697	3,136,547
SHAREHOLDERS’ EQUITY
Stated Capital	1,240,000	1,240,000
Retained Earnings	2,830,815	2,406,842
Total Shareholders’ Equity	4,070,815	3,646,842
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	6,078,512	6,783,389

ALPHA TECHNOLOGY SOLUTIONS LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER 2021

	2021 (GHS)	2020 (GHS)
Revenue	11,180,208	12,957,649
Direct Cost	(7,446,676)	(9,703,650)
Gross Profit	3,733,532	3,253,999
Other Income	–	23,436
Administrative Expenses	(3,168,234)	(2,483,480)
Operating Profit	565,298	793,955
Income Tax Expense	(141,325)	(198,489)
Profit/(Loss) After Taxation	423,973	595,466

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acid Test Ratio, Banking Sector, Credit Officer, Debt to Equity, Financial Analysis, Gross Profit Margin, Payable Period, Report Writing, ROCE
Level: Level 3

Topic: FINANCIAL REPORTING, PLANNING AND ANALYSIS
Series: APR 2023

CML – APRIL 2023 – L3 – Q3 – Critical Examination of Agro-Processing Equipment Finance

Critically examine a USD 540,000 equipment purchase request from Pistashio Cashew Nuts Ltd, using background and financials (exchange rate GHC13/USD).

Question

Mrs. Amo aged 65 a seasoned chartered accountant serves as the CFO and Head of HR for the company. She joined the company five years ago when she retired as Head of Internal Audit for Bank of Ghana.

Mr. Kweku Dadzie aged 68 has served as the factory manager for the company since his retirement from Gold Coast Aluminum Works as factory supervisor eight years ago.

Critically examine this proposition using the information above and the related financial statements provided below.

Pisticashio Cashew Nuts Ltd Profit and Loss Extracts for the year ending 31 Dec

	2020 GHC	2021 GHC	2022 GHC
Sales	1,850,000	2,571,500	3,985,825
Opening Inventory	245,000	289,000	442,800
Purchases & Production	1,239,500	1,748,620	2,790,078
	1,484,500	2,037,620	3,232,878
Closing Inventory	289,000	442,800	770,500
Cost of Sales	1,195,500	1,594,820	2,462,378
Gross Profit	654,500	976,680	1,523,447
Overheads	175,000	298,000	476,800
Depreciation	259,000	312,400	372,400
Operating Profit	220,500	366,280	674,247
Interest Paid	125,000	145,000	158,000
Profit Before Tax	95,500	221,280	516,247
Tax	23,875	55,320	129,062
Profit After Tax	71,625	165,960	387,185

Noncurrent Assets	2020	2021	2022
Building	684,000	831,600	929,200
Plant & Machinery	360,000	240,000	390,000
Motor Vehicles	270,000	380,000	360,000
Furniture and Fixtures	110,000	160,000	110,000
Total	1,424,000	1,611,600	1,789,200
Current Assets
Inventory	289,000	442,800	770,500
Receivables	258,000	254,700	574,000
Prepayments	25,600	36,800	47,800
Bank	125,000	85,400	75,800
	697,600	819,700	1,468,100
Current Liabilities
Trade Creditors	148,000	184,700	435,200
Overdraft	854,900	1,544,920	1,426,827
Total Current Liabilities	1,002,900	1,729,620	1,862,027
Net Current Assets	-305,300	-909,920	-393,927
Net Assets	1,118,700	701,680	1,395,273
Capital
Share Capital	1,000,000	500,000	1,000,000
Income Surplus	118,700	201,680	395,273
	1,118,700	701,680	1,395,273

Ratios

	2020	2021	2022
Sales Growth		39.00%	55.00%
Receivable Days	51	36	53
Payable Days	44	39	57
Inventory Turnover Days	88	101	114
Gross Margin	35%	38%	38%
Overhead %	9%	12%	12%
Net Margin	5%	9%	13%
Interest Cover	1.76	2.53	4.27
Current Ratio	0.70	0.47	0.79
Quick Ratio	0.41	0.22	0.37
Tax Rate	25%	25%	25%
Dividend Payout RATIO	50%	50%	50%
Inventory to Sales	16%	17%	19%
Receivables to Sales	14%	10%	14%
Payables to Sales	8%	7%	11%

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agro Industry, Credit Decision, Equipment Finance, Export risks, Financial Analysis, Ratio Assessment
Level: Level 3

Topic: Accounting interpretation for lending
Series: APR 2023

CML – APRIL 2023 – L3 – Q2 – Critical Examination of Restaurant Property Acquisition Loan

Critically examine a loan request from Aduane Restaurants and Mobile Food Ltd for 80% financing (GHC 640,000) of a new premises purchase, using company background and financials.

Question

Critically examine this proposition as per information above and the related financial statements below.

Aduane Restaurant and Mobile Food Ltd Profit and Loss Extracts for the year ending 31st Dec

	2020 GHC	2021 GHC	2022 GHC
Sales	1,899,500	2,796,460	3,215,929
Opening Inventory	204,570	321,215	503,363
Production cost	968,945	1,482,124	1,768,761
	1,173,515	1,803,339	2,272,124
Closing Inventory	321,215	503,363	643,186
Cost of Sales	852,300	1,299,976	1,628,938
Gross Profit	1,047,200	1,496,484	1,586,991
Overheads	44,880	235,386	268,292
Depreciation	131,000	162,500	256,500
Operating Profit	871,320	1,098,598	1,062,199
Interest Paid	38,000	54,000	102,000
Profit Before Tax	833,320	1,044,598	960,199
Tax	208,330	261,150	240,050
Profit After Tax	624,990	783,449	720,149

Noncurrent Assets	2020	2021	2022
Building	615,000	600,000	585,000
Equipment	75,000	118,500	232,000
Motor Vehicles	210,000	200,000	395,000
Furniture and Fixtures	114,000	123,000	118,000
Total	1,014,000	1,041,500	1,330,000
Current Assets
Inventory	321,215	503,363	643,186
Receivables	445,880	701,150	1,010,560
Prepayment	19,250	45,210	55,610
Bank	15,000	14,800	25,600
	801,345	1,264,523	1,734,956
Current Liabilities
Trade Payables	322,915	531,327	675,345
Overdraft	125,000	15,542	270,382
Total Current Liabilities	447,915	546,869	945,727
Net Current Assets	353,430	717,654	789,229
Net Assets	1,367,430	1,759,154	2,119,229
Financed by
Capital
Share Capital	800,000	800,000	800,000
Income Surplus	567,430	959,154	1,319,229
	1,367,430	1,759,154	2,119,229

Ratios

	2020	2021	2022
Sales Growth		47.22%	15.00%
Receivable Days	86	92	115
Payable Days	122	131	139
Inventory Turnover Days	138	141	144
Gross Margin	55%	54%	49%
Overhead %	2%	8%	8%
Net Margin	43.87%	37.35%	29.86%
Interest Cover	22.93	20.34	10.41
Current Ratio	1.79	2.31	1.83
Quick Ratio	1.07	1.39	1.15
Tax Rate	25%	25%	25%
Inventory to Sales	17%	18%	20%
Receivables to Sales	23%	25%	31%
Payables to Sales	17%	19%	21%
Gearing	9.14%	0.88%	12.76%
Dividend Payout Ratio	50%	50%	50%

Answer

Find Related Questions by Tags, levels, etc.

Tags: Credit risk, Financial Analysis, Loan Structuring, Property Finance, Ratio Trends, Restaurant Sector
Level: Level 3

CML – APRIL 2023 – L3 – Q1 – Gold Coast Shipping Company Ltd Financing Proposition

Critically examine the financing proposition from Gold Coast Shipping Company Ltd for a USD 2.0 million down payment on a new ship, using provided company background, operations, and financial statements for 2020-2022.

Question

The company has a fleet of ten cargo ships and ten container ships. It has three main offices located in Tema, Takoradi and London in the UK.

Each office of the company has an Office Manager all of whom are experienced expatriate shipping managers poached from international shipping companies.

Critically examine this proposition using the information above and the related financial statements provided below.

Gold Star Shipping Ltd Statement of Comprehensive Income as at 31 Dec 2020 GHC

Gold Star Shipping Ltd Balance Sheet as at 31st Dec

Noncurrent Assets	2020	2021	2022
Building	147,000	238,000	327,000
Equipment	9,000,000	11,325,000	10,150,000
Motor Vehicles	720,000	480,000	432,000
Furniture and Fixtures	350,000	260,000	170,000
Total	10,217,000	12,303,000	11,079,000
Current Assets
Inventory	135,000	185,000	197,000
Receivables	245,000	254,000	1,998,000
Prepayments	146,200	158,400	268,700
Bank	950,800	241,250	746,805
	1,477,000	838,650	3,210,505
Current Liabilities
Trade Payables	125,000	135,600	156,400
Overdraft	45,000	65,000	85,200
Total Current	170,000	200,600	241,600
Liabilities
Net Current Assets	1,307,000	638,050	2,968,905
Net Assets	11,524,000	12,941,050	14,047,905
Capital
Share Capital	10,000,000	10,000,000	10,000,000
Income Surplus	1,524,000	2,941,050	4,047,905
	11,524,000	12,941,050	14,047,905

RATIOS 2020 2021 2022

Sales Growth 5.11% 3.61%

Receivable Days 7 6 49

Payable Days 7 7 7

Inventory Turnover Days 8 10 9

Gross Margin 55% 52% 48%

Overhead % 12% 13% 16%

Net Margin 30.24% 26.24% 19.78%

Interest Cover 9.63 11.74 10.45

Current Ratio 8.69 4.18 13.29

Quick Ratio 7.89 3.26 12.47

Tax Rate 25% 25% 25%

Dividend Payout RATIO 50% 50% 50%

Inventory to Sales 0.01 0.01 0.01

Receivables to Sales 0.01 0.01 0.13

Payables to Sales 0.01 0.01 0.01

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cargo Loss Impact, Financial Analysis, Fleet Replacement, lending proposition, Risk Assessment, Security Requirements, Shipping Company
Level: Level 3

CML – APRIL 2024 – LEVEL 3 – Q1 – BA Brazil Nuts Ltd Lending Proposition

Critically examine a request from BA Brazil Nuts Ltd for an overdraft increase to GHC10 million and a USD 500,000 term loan for new equipment, considering their financials, operations, and recent challenges like a fire outbreak.

Question

The company’s Overdraft Facility of GHC 5,000,000.00 is showing a hard core at around GHC 3,000,000.00. The company is requesting for:

An increase in the Overdraft Facility to GHC10 million in support of Working Capital.
A Term Loan of USD 500,000 for the purchase of new Brazil Nut Roasting and Packaging Plant for the new factory. GHS/USD = GHS 13.5/USD1

Critically examine this proposition. [30 MARKS] BA Brazil Nuts Ltd. Profit and Loss Extracts for the year ending 31 Dec

2021	2022	2023
GHC	GHC	GHC
5,750,000	6,900,000	7,690,000
472,610	534,100	758,420
3,150,000	4,142,000	4,605,800
3,622,610	4,676,100	5,364,220
534,100	758,420	985,400
3,088,510	3,917,680	4,378,820
2,661,490	2,982,320	3,311,180
690,000	779,700	991,580
405,000	417,400	777,400
1,566,490	1,785,220	1,542,200
439,600	574,000	684,500
1,126,890	1,211,220	857,700
281,723	302,805	214,425
845,167	908,415	643,275

BA Brazil Nuts Ltd. Balance Sheet as at 31 Dec

Ratios 2021 2022 2023 Sales Growth

20.00%

11.45%

Receivable Days

112

141

Payable Days

Inventory Turnover Days

Gross Margin

46%

43%

Overhead %

12%

11%

13%

Answer

Find Related Questions by Tags, levels, etc.

Tags: agricultural engineering, expansion risks, export business, Financial Analysis, fire outbreak risk, lending proposition, overdraft increase, Risk Assessment, Term Loan, Working Capital
Level: Level 3

Topic: Farming
Series: APR 2024

TAI – Aug 2020 – L1 – Q4 – Audit Review and Reporting

Recommend examination procedures for reviewing God’s Time Ltd.’s profit forecast for COVID-19 financial assistance.

Question

The operating profit forecast for the two years to 31st December 2020 prepared by a member of the accounting team of God’s Time Ltd is shown below, along with some accompanying notes.

	Six months to 30th June 2019	Six months to 31st Dec. 2019	Six months to 30 June. 2020	Six months to 31st Dec. 2020
	GH¢	GH¢	GH¢	GH¢
Earnings	2,801,597	3,088,680	4,210,265	4,429,728
Direct costs	2,135,938	2,315,746	3,413,711	3,618,584
Gross Profit	665,659	772,934	796,554	811,144
Operating Exp.
Wages & Salaries	168,452	184,864	209,546	218,762
Advertising	13,840	20,542	28,548	31,540
Design costs	21,580	32,456	50,452	43,546
Marketing	10,896	12,458	16,520	34,450
Interest on Loan	45,543	48,620	51,654	60,542
Other Operating Exp	266,264	309,173	318,622	324,458
Net Profit	139,084	164,821	121,212	97,846

Additional Notes: i. God’s Time Ltd is a producer of greetings cards and giftware; the demand for which is seasonal in nature.

ii. Design costs are mostly payroll costs of the staff working in the company’s design team, and the costs relate to the design and development of new product ranges.

iii. The total ‘Other expenses’ is calculated based on 40% of the projected revenue for the six-month period.

iv. In 2019, the company was granted a loan facility to complete the ongoing factory project.

Required:

Recommend the examination procedures which should be used in the review of the profit forecast. (B)

Required:

Outline the audit steps to verify that, all tax payments and tax credits has been captured and the liability as reported is accurate.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance Engagement, Audit Procedures, COVID-19 Assistance, Financial Analysis, Ghana Revenue Authority, Profit Forecast
Level: Level 1

Topic: Audit Review and Reporting, Revenue Inquiry and Financial Analysis
Series: AUGUST 2020

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

Question

(a) You are a tax audit team leader responsible for the audit of Mina Macarthy Limited.

Mina Macarthy Limited owns a block of flats and earns its income through rentals and general dealing. On 1st January 2019, the ledger accounts of the company included the following balances.

Debtors’ account GH¢475,000

Provision for doubtful debts account GH¢ 42,235

The balance on the provision account consisted of the following: GH¢

Specific provision of 100% against the debt of Charles Sulemana, a tenant 31,500

General provision of 1% against remaining debts
12,235

During the year ended 31st December 2019, the following events occurred.

i. Charles Sulemana paid Mina Macarthy GH¢11,150 and then vanished without trace to new world, leaving no assets.

ii. Another tenant, Antonio Banderas, who owed GH¢3,900 fell into a river and was also found to have died penniless.

iii. Azuma Nickson returned from total obscurity and paid an amount of GH¢6,450 which Mina Macarthy Ltd had written off in 2017.

iv. Credit sales for the year amounted to GH¢8,167,400 and cash received from debtors (other than Sulemana and Azuma) totaled GH¢3,150,000

v. On 31st December 2019, Mina Macarthy Ltd decided to provide in full against a disputed debt of GH¢51,200 owed by Kwesi Otoo Pratt, and to maintain the 1% general provision on other debtors.

Additional notes

The company has submitted its returns for 2019 which showed a profit before tax of GH¢375,650.

In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

i. Explain how a bad debt may arise for VAT.

(bii) In order to claim a VAT bad debt, a business must show proof of the bad debt.

Required:

ii. Explain the circumstances under which a bad debt relief can be claimed.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Audit Review, Bad Debts, Debtors, Financial Analysis, Provisions, Tax Audit, Tax Compliance, VAT
Level: Level 1

Topic: Audit Review and Reporting, Tax Audits and Investigations
Series: AUGUST 2020

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

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compliance, Cybersecurity, Digital Transformation, Ethics, Financial Analysis, Ratio Analysis
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements, Beyond financial reporting
Series: Nov 2024

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

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 %

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Analysis, Investment Decision, Leverage, Liquidity, Profitability, Ratio Analysis, Working Capital Management
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: Nov 2024

Question Tag: Financial Analysis

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

CML – OCT 2022 – L3 – Q1 – Lending to Iron Rod Manufacturing Company

Evaluate a request for GHC 3.0 million working capital finance from a long-term customer manufacturing iron rods, aiming to supply government projects, considering eroded profits and provided financials.

You're reporting an error for "CML – OCT 2022 – L3 – Q1 – Lending to Iron Rod Manufacturing Company"

FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

You're reporting an error for "FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment"

CML – APRIL 2023 – L3 – Q3 – Critical Examination of Agro-Processing Equipment Finance

Critically examine a USD 540,000 equipment purchase request from Pistashio Cashew Nuts Ltd, using background and financials (exchange rate GHC13/USD).

You're reporting an error for "CML – APRIL 2023 – L3 – Q3 – Critical Examination of Agro-Processing Equipment Finance"

CML – APRIL 2023 – L3 – Q2 – Critical Examination of Restaurant Property Acquisition Loan

Critically examine a loan request from Aduane Restaurants and Mobile Food Ltd for 80% financing (GHC 640,000) of a new premises purchase, using company background and financials.

You're reporting an error for "CML – APRIL 2023 – L3 – Q2 – Critical Examination of Restaurant Property Acquisition Loan"

CML – APRIL 2023 – L3 – Q1 – Gold Coast Shipping Company Ltd Financing Proposition

Critically examine the financing proposition from Gold Coast Shipping Company Ltd for a USD 2.0 million down payment on a new ship, using provided company background, operations, and financial statements for 2020-2022.

You're reporting an error for "CML – APRIL 2023 – L3 – Q1 – Gold Coast Shipping Company Ltd Financing Proposition"

CML – APRIL 2024 – LEVEL 3 – Q1 – BA Brazil Nuts Ltd Lending Proposition

Critically examine a request from BA Brazil Nuts Ltd for an overdraft increase to GHC10 million and a USD 500,000 term loan for new equipment, considering their financials, operations, and recent challenges like a fire outbreak.

Ratios 2021 2022 2023 Sales Growth

You're reporting an error for "CML – APRIL 2024 – LEVEL 3 – Q1 – BA Brazil Nuts Ltd Lending Proposition"

TAI – Aug 2020 – L1 – Q4 – Audit Review and Reporting

Recommend examination procedures for reviewing God’s Time Ltd.’s profit forecast for COVID-19 financial assistance.

You're reporting an error for "TAI – Aug 2020 – L1 – Q4 – Audit Review and Reporting"

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

You're reporting an error for "TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting"

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.

You're reporting an error for "CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration"

CR – Nov 2024 – L3 – Q5a – Financial Analysis and Investment Evaluation

Compute financial ratios for Nsawkaw PLC to evaluate its financial performance for investment recommendation.

Summarised Consolidated Statement of Profit or Loss for the year ended 30 June 2024

Summarised Consolidated Statement of Changes in Equity for the year ended 30 June 2024

Summarised Statement of Financial Position as at 30 June 2024

You're reporting an error for "CR – Nov 2024 – L3 – Q5a – Financial Analysis and Investment Evaluation"

CML – OCT 2022 – L3 – Q1 – Lending to Iron Rod Manufacturing Company

Evaluate a request for GHC 3.0 million working capital finance from a long-term customer manufacturing iron rods, aiming to supply government projects, considering eroded profits and provided financials.

You're reporting an error for "CML – OCT 2022 – L3 – Q1 – Lending to Iron Rod Manufacturing Company"

FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment

Compute five specified ratios for 2021 and 2020 using provided financial statements and write a report analyzing the company's performance comparing the two years.

You're reporting an error for "FRPA – APRIL 2023 – L3 – Q4 – Ratio Analysis and Performance Report for Loan Assessment"

CML – APRIL 2023 – L3 – Q3 – Critical Examination of Agro-Processing Equipment Finance

Critically examine a USD 540,000 equipment purchase request from Pistashio Cashew Nuts Ltd, using background and financials (exchange rate GHC13/USD).

You're reporting an error for "CML – APRIL 2023 – L3 – Q3 – Critical Examination of Agro-Processing Equipment Finance"

CML – APRIL 2023 – L3 – Q2 – Critical Examination of Restaurant Property Acquisition Loan

Critically examine a loan request from Aduane Restaurants and Mobile Food Ltd for 80% financing (GHC 640,000) of a new premises purchase, using company background and financials.

You're reporting an error for "CML – APRIL 2023 – L3 – Q2 – Critical Examination of Restaurant Property Acquisition Loan"

CML – APRIL 2023 – L3 – Q1 – Gold Coast Shipping Company Ltd Financing Proposition

Critically examine the financing proposition from Gold Coast Shipping Company Ltd for a USD 2.0 million down payment on a new ship, using provided company background, operations, and financial statements for 2020-2022.

You're reporting an error for "CML – APRIL 2023 – L3 – Q1 – Gold Coast Shipping Company Ltd Financing Proposition"

CML – APRIL 2024 – LEVEL 3 – Q1 – BA Brazil Nuts Ltd Lending Proposition

Critically examine a request from BA Brazil Nuts Ltd for an overdraft increase to GHC10 million and a USD 500,000 term loan for new equipment, considering their financials, operations, and recent challenges like a fire outbreak.

Ratios 2021 2022 2023 Sales Growth

You're reporting an error for "CML – APRIL 2024 – LEVEL 3 – Q1 – BA Brazil Nuts Ltd Lending Proposition"

TAI – Aug 2020 – L1 – Q4 – Audit Review and Reporting

Recommend examination procedures for reviewing God’s Time Ltd.’s profit forecast for COVID-19 financial assistance.

You're reporting an error for "TAI – Aug 2020 – L1 – Q4 – Audit Review and Reporting"

TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting

Comment on matters and audit evidence for bad debt provisions and VAT claims of Mina Macarthy Limited for 2019.

You're reporting an error for "TAI – Aug 2020 – L1 – Q3 – Audit Review and Reporting"

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.

You're reporting an error for "CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration"

CR – Nov 2024 – L3 – Q5a – Financial Analysis and Investment Evaluation

Compute financial ratios for Nsawkaw PLC to evaluate its financial performance for investment recommendation.

Summarised Consolidated Statement of Profit or Loss for the year ended 30 June 2024

Summarised Consolidated Statement of Changes in Equity for the year ended 30 June 2024

Summarised Statement of Financial Position as at 30 June 2024

You're reporting an error for "CR – Nov 2024 – L3 – Q5a – Financial Analysis and Investment Evaluation"

Our offerings

Community

Contact Info

Customer

Get In Touch

admin