Question Tag: Financial Ratios

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 5 Marks

FA – Nov 2024 – L1 – Q5c – Profitability vs Liquidity Ratios

Explain the difference between profitability and liquidity ratios and provide two examples of each.

Accounting ratios cover a wide array of ratios that are used by accountants and act as different indicators that measure profitability, liquidity, and potential financial distress in a company’s financials.

Required:

Differentiate between profitability ratios and liquidity ratios and give TWO examples each.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – Nov 2024 – L1 – Q5c – Profitability vs Liquidity Ratios"

  • 20 Marks

CR – May 2015 – L3 – Q3 – Emerging Trends in Corporate Reporting

Analyze financial statements of two companies and discuss limitations of ratio analysis.

Real Expansion Plc is a large group that seeks to grow by acquisition. The directors have identified two potential entities and obtained copies of their financial statements. The accountant of the company computed key ratios to evaluate the performance of these companies relating to:

  • Profitability and returns;
  • Efficiency in the use of assets;
  • Corporate leverage; and
  • Investor-based decisions.

The computation generated hot arguments among the directors, and they decided to engage a Consultant to provide expert advice on which company to acquire.

Extracts from these financial statements are given below:

Required:

(a) As the Consultant to the company, carry out a financial analysis on the financial statements and advise the company appropriately. (15 Marks)

(b) State the major limitations of ratio analysis for performance evaluation. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2015 – L3 – Q3 – Emerging Trends in Corporate Reporting"

  • 15 Marks

FM – Nov 2016 – L3 – SC – Q6 – Strategic Performance Measurement

Evaluate Osamco Limited’s financial performance compared to industry benchmarks and discuss reasons for considering stock exchange listing.

Osamco Limited, manufacturer of wire and cables, was bought from its conglomerate parent company in a management buyout deal in August 2010. Six years later, the managers are considering the possibility of listing the company’s shares on the Nigerian Stock Exchange.

The following information is made available:

OSAMCO LIMITED
INCOME STATEMENT FOR THE YEAR ENDED JUNE 30, 2016

N’million Amount
Turnover 91.25
Cost of sales (79.00)
Profit before interest and taxation 12.25
Interest (3.25)
Profit before taxation 9.00
Taxation (1.25)
Profit attributable to ordinary shareholders 7.75
Dividend (0.75)
Retained profit 7.00

STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2016

N’million Amount
Non-current assets (at cost less accumulated depreciation)
Land and buildings 9.00
Plant and machinery 24.75
Total non-current assets 33.75
Current assets
Inventories 11.00
Accounts receivable 11.75
Cash at bank 2.50
Total current assets 25.25
Total assets 59.00
Equity
Ordinary shares of N1 each 6.75
Reserves 24.25
Total equity 31.00
Non-current liabilities
Accounts payable due after more than one year: 12% Debenture 2018 5.50
Current liabilities
Trade accounts payable 17.50
Bank overdraft 5.00
Total current liabilities 22.50
Total equity and liabilities 59.00

Industry sector ratios:

Metric Industry Average
Return before interest and tax on long-term capital employed 24%
Return after tax on equity 16%
Operating profit as percentage of sales 11%
Current ratio 1.6:1
Quick (acid test) ratio 1.0:1
Total debt: equity (gearing) 24%
Dividend cover 4.0
Interest cover 4.5

Required:
a. Evaluate the financial state and performance of Osamco Limited by comparing it with that of its industry sector. (10 Marks)

b. Discuss FOUR probable reasons why the management of Osamco Limited is considering Stock Exchange listing. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FM – Nov 2016 – L3 – SC – Q6 – Strategic Performance Measurement"

  • 20 Marks

FM – May 2017 – L3 – Q4 – Financing Decisions and Capital Markets

Analyze and propose the use of convertible bonds for funding a warehouse project.

You are a financial consultant to a major company based in Kano. The company plans to build a major warehouse in Abuja. You plan to convince the company’s manager to raise the needed funds through a convertible bond issue. Based on the company’s current bond rating of BBB, you have projected the following offer terms:

  • Maturity: 6 years
  • Annual Coupon: 1%
  • Conversion Ratio: 50 shares
  • Par Value per Bond: ₦1,000
  • Issue Price: 98% of par value
  • Current Stock Price: ₦16
  • Risk-free Rate: 0.5%
  • Coupon on Straight Bonds: 2% (trading at par)

The proposal suggests raising up to ₦20,000,000. However, with key financial ratios close to the boundaries of the rating category, offering the full amount could threaten the BBB rating.

Given an average business risk profile, the following rating guidelines apply:

Rating Category Minimum Interest Cover Default Spread
BBB 2.39 0.5%
BBB- 2.04 1.0%

Selected Financial Data about the Company:

  • Estimated EBIT: ₦2,200,000
  • Current Interest Expenses: ₦800,000

Required:

a.
i. Determine the value of the convertible bond offer. (5 Marks)
ii. Discuss why the convertible bond cannot generally be considered as “cheap debt” despite its low coupon, given its financing advantage quantified in economic terms. (3 Marks)

b.
i. Compute the company’s current interest coverage ratio. (1 Mark)
ii. How much money should be raised with the convertible bond issue (in thousands of naira) to avoid the threat of a rating downgrade, based on the quoted rating guidelines? (4 Marks)

c. Advise the company on the advantages of convertible bonds for companies on one hand and for investors on the other hand. (7 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FM – May 2017 – L3 – Q4 – Financing Decisions and Capital Markets"

  • 20 Marks

CR – Nov 2014 – L3 – SB – Q3 – Presentation of Financial Statements (IAS 1)

Analyze Prochain Plc’s financial performance and calculate key ratios for loan covenants.

Prochain Plc

The Directors of Prochain Plc have pursued an aggressive policy of expansion in the last two years. They have developed several new products and market share has increased.

The financial statements for the year ended 31 December 2013, which will be presented to the Board of Directors at its next meeting, are being finalised. The financial statements at the year-end are presented below:

Statement of profit or loss and other comprehensive income for the year ended 31 December

The results of the company as well as certain key ratios that will form part of the covenants in respect of the loan facilities will be discussed at the Board of Directors meeting.

Notes:

  1. The movement on the revaluation reserve relates to property, plant, and equipment revalued in the year.
  2. The movement on other reserves relates to the gains on the investments available for sale.
  3. The bonds are repayable on 1 July 2015.

Required:

(a) Based on the results of Prochain Plc for the year ended 31 December 2013, calculate the key ratios for the loan.
(8 Marks)

(b) Prepare a report commenting on the financial performance for the year in relation to the key ratios for the loan.
(12 Marks)

(Total 20 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2014 – L3 – SB – Q3 – Presentation of Financial Statements (IAS 1)"

  • 15 Marks

FM – Nov 2016 – L3 – Q6 – Strategic Performance Measurement

Evaluate Osamco Limited's financial performance and discuss reasons for its potential stock exchange listing.

Osamco Limited, a manufacturer of wire and cables, was bought from its conglomerate parent company in a management buyout deal in August 2010. Six years later, the managers are considering the possibility of listing the company’s shares on the Nigerian Stock Exchange.

The following financial information is made available:

OSAMCO LIMITED
Income Statement for the Year Ended June 30, 2016

Item Amount (N’million)
Turnover 91.25
Cost of sales (79.00)
Profit before interest and taxation 12.25
Interest (3.25)
Profit before taxation 9.00
Taxation (1.25)
Profit attributable to ordinary shareholders 7.75
Dividend (0.75)
Retained profit 7.00

Statement of Financial Position as at June 30, 2016

Average performance ratios for the industry sector in which Osamco Limited operates are as stated below:

Industry Sector Ratios

Ratio Industry Average
Return before interest and tax on long-term capital employed 24%
Return after tax on equity 16%
Operating profit as a percentage of sales 11%
Current ratio 1.6:1
Quick (acid test) ratio 1.0:1
Total debt: equity (gearing) 24%
Dividend cover 4.0
Interest cover 4.5

Required:

  1. (a) Evaluate the financial state and performance of Osamco Limited by comparing it with that of its industry sector. (10 Marks)
  2. (b) Discuss four probable reasons why the management of Osamco Limited is considering Stock Exchange listing. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FM – Nov 2016 – L3 – Q6 – Strategic Performance Measurement"

  • 12 Marks

CR – Nov 2021 – L3 – Q2b – Earnings Per Share (IAS 33)

Calculate basic and diluted earnings per share (EPS) from Nsukka Plc’s consolidated financial statements.

b. The following financial information relates to Nsukka Group for the year ended June 30, 2021.

Nsukka Group Consolidated Statement of Financial Position as at June 30, 2021

Additional Information:

  1. Nsukka PLC reports a profit after tax, after adjusting for all current year accounting issues, of N1,850,000 and an effective tax rate of 20%.
  2. For the first time, Nsukka PLC issued 1,000,000 ordinary shares and granted options for 400,000 shares on July 1, 2020. The exercise price was the market price of N1.50 per share at the grant date. Options vest on July 1, 2020, and expire on June 30, 2022. The average market price of shares in Nsukka Plc during the year ended June 30, 2022, was N1.834.
  3. A rights issue of 1 for every 20 shares was made on May 31, 2021, at a price of N1.30 per share. The market price at this date was N1.60, and the average price for the year to June 30, 2021, was N1.65.
  4. Nsukka PLC has N1,000,000 of 6% convertible loans included in other non-current liabilities. These were in issue throughout the year and may be converted into 100,000 ordinary shares. No loans were converted during the year. There are no dividends in arrears on the 3% preference shares.

Required:

Evaluate basic and diluted earnings per share from the consolidated statement of financial position as at June 30, 2021, for Nsukka Plc.
(12 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2021 – L3 – Q2b – Earnings Per Share (IAS 33)"

  • 20 Marks

CR – May 2018 – L3 – SB – Q2 – Associates and Joint Ventures (IAS 28

Calculate and interpret key financial ratios for Wole-Adura Group and evaluate liquidity.

Set out below are the draft accounts of Wole-Adura Plc and subsidiaries and of Maseru Associates. Wole-Adura acquired 40% of the equity capital of Maseru Associates three years ago when the latter’s retained earnings stood at N140m.

Abridged statement of financial position

Wole-Adura Plc & Subsidiaries Maseru Associates
Property, plant, and equipment 990 Nm
Investment in Maseru Associates at cost 290 Nm
Loan to Maseru Associates 70 Nm
Current assets 450 Nm
Loan from Wole-Adura Plc. –
Total Assets 1800 Nm

FINANCED BY:

| Ordinary shares of 50k each | 1,125 Nm | 350 Nm | | Retained earnings | 675 Nm | 350 Nm | | Total Equity | 1800 Nm | 700 Nm |

Abridged statements of profit or loss

Wole-Adura Plc & Subsidiaries Maseru Associates
Profit before tax 427.50 Nm
Tax expense (157.50 Nm)
Profit after tax 270.00 Nm

Additional information:

(i) Wole-Adura proposed a dividend of N225m.
(ii) Total market capitalisation is N5,625m.

Required:

(a) Calculate each of these ratios for Wole-Adura Plc. and subsidiaries:

  1. Earnings per share
  2. Dividend cover
  3. Earnings yield
  4. Dividend yield

(4 Marks)

(b)

  1. Using the equity method, compute the earnings of the group incorporating the associates. (4 Marks)
  2. Compute the ratios in (a) above for the group. (4 Marks)

(c) Comment on the ratios calculated in (a) and (b) above by pairwise comparison. (3 Marks)

(d) Extracts from the financial statements of Ikoku Plc. recently published are as follows:

Statement of profit or loss for the year ended December 31, 2017

2017 2016
Revenue 360 Nm
Cost of sales (150 Nm)
Gross profit 210 Nm
Operating expenses (50 Nm)
Operating profit 160 Nm
Interest expense (10 Nm)
Tax expense (60 Nm)
Profit for the year 90 Nm

Statement of financial position as at December 31, 2017

2017 2016
Non-current assets
Property, plant & equipment 80 Nm
Current assets
Inventory 200 Nm
Trade receivables 70 Nm
Bank (50 Nm)
Total assets 300 Nm

Equity & liabilities

| Ordinary shares of N1 each | 60 Nm | 40 Nm | | Current liabilities | | | Trade payables | 190 Nm | 60 Nm | | Current tax | 50 Nm | 15 Nm | | Total liabilities and equity | 300 Nm | 115 Nm |

Required:

Discuss the liquidity challenges of Ikoku Plc. during the year ended December 31, 2017, from the extracts of the published financial statements. (5 Marks)

(Total 20 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – SB – Q2 – Associates and Joint Ventures (IAS 28"

  • 20 Marks

CR – Nov 2018 – L3 – SB – Q3 – Business Combinations (IFRS 3)

Evaluation of Abana and Doha as potential acquisition targets using adjusted financial ratios.

Banny Plc. (Banny) is a diversified company that has achieved its present size through vertical and horizontal acquisition. The directors have identified two potential target entities for acquisition. The first is Abana Limited (Abana), which operates a cement business near Offa, Kwara State. The second is Doha Limited (Doha), also in the cement industry, located near Oturukpo, Benue State. Banny has obtained copies of their audited financial statements, along with additional information notes.

Statement of Profit or Loss for the Year Ended December 31, 2017

Item Abana (₦’m) Doha (₦’m)
Revenue 136,000 132,000
Cost of sales (84,000) (91,900)
Gross profit 52,000 40,100
Other operating expenses (36,000) (28,000)
Profit from operations 16,000 12,100
Finance costs (6,000) (8,000)
Profit before tax 10,000 4,100
Income tax expense (3,000) (2,000)
Net profit for the period 7,000 2,100

Statement of changes in equity for the year ended December 31, 2017

Statement of financial position as at December 31, 2017

Additional Notes:

  1. Doha revalued its non-current assets for the first time following IFRS adoption on January 1, 2017. Abana maintains its non-current assets at historical cost.
  2. Banny uses the following ratios to evaluate acquisition targets: Return on Capital Employed (ROCE), Gross Profit Margin, Turnover on Capital Employed, and Leverage.

Required:

a. Compute adjustments for the revaluation of property, plant, and equipment, making Abana and Doha comparable for analysis. (14 Marks)

b. Calculate the four ratios (ROCE, Gross Profit Margin, Turnover on Capital Employed, and Leverage) after adjustments. (4 Marks)

c. Advise Banny on the better acquisition target based on adjusted ratios. (2 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2018 – L3 – SB – Q3 – Business Combinations (IFRS 3)"

  • 20 Marks

CR – Nov 2023 – L3 – SB – Q2 – Consolidated Financial Statements (IFRS 10)

Analyze the profitability, cash flow, and investor ratios of Mama-Kitchen PLC and discuss dividend policy and EPS limitations.

Mama-Kitchen PLC owns a number of subsidiaries that operate standard fast-food eateries in all the six geopolitical zones of the country. You are the financial analyst of your Bank (Pam-Pam Bank Nigeria Limited) which owns 10% of the issued share capital of Mama-Kitchen PLC.

You are provided with the following financial and background information on Mama-Kitchen PLC.

Mama-Kitchen PLC

Consolidated statement of profit or loss for the year ended September 30

2023 2022
Revenue 188,900 145,850
Cost of sales (141,700) (110,400)
Gross profit 47,200 35,450
Admin expenses (31,200) (22,400)
Profit from operations 16,000 13,050
Finance cost (2,050) (2,100)
Profit before taxation 13,950 10,950
Income tax expense (3,050) (2,300)
Profit for the year 10,900 8,650
Earnings per share – basic 26.8k 21.3k
Earnings per share – diluted 21.2k 19.2k

Mama-Kitchen PLC

Consolidated statement of cash flows for the year ended September 30

2023 2022
Cash flows from operating activities:
Profit before taxation 13,950 10,950
Finance cost 2,050 2,100
Depreciation and amortisation 15,300 11,050
Loss on disposal of PPE 150 50
(Increase)/decrease in inventories (200) 50
Increase/decrease in receivables (1,250) (100)
Increase in trade payables 2,250 650
Total 32,250 24,750
Interest paid (2,050) (2,200)
Tax paid (1,600) (1,300)
Net cash flows from operating activities 28,600 21,250
Cash flows from investing activities:
Purchase of PPE (29,850) (28,950)
Proceed from sale of PPE 100 150
Net cash used in investing activities (29,750) (28,800)
Cash flows from financing activities:
Proceeds from issues of shares 1,200 100
Borrowings 3,250 10,000
Net cash flow from financing activities 4,450 10,100
Net increase in cash and cash equivalents 3,300 2,550
Cash and cash equivalents at beginning 12,400 9,850
Cash and cash equivalents at year end 15,700 12,400

Details of revenue, fast food outlets profits, and new fast food outlets openings for the year ended September 30

2023 2022
Revenue per fast food outlets:
At September 30 1,770 1,715
Opened in the current financial year 1,290 –
Gross profit per outlet opened
At September 30 435 415
In the current financial year 345

Note:

  • 30 new outlets were opened during the year ended September 30, 2023, bringing the total to 115 fast food outlets.

Additional financial information

2023 2022
Gross profit margin 25% 24.3%
Debt equity ratio 35.2% 44.4%
Current ratio 0.56:1 0.48:1
Trade payables payment period 86 days 103 days
Return on capital employed 20% 19.1%
Cash return on capital employed 40.2% 36.3%
Earnings before Interest, tax, depreciation and amortisation (N‟m) 31,300 24,100
Non-current assets turnover 1.68 times 1.49 times
Share price (at September 30) 302k 290k

Background information

i. Mama-Kitchen PLC has a reputation of depreciating its assets more slowly than others in the industry.

ii. The strategy of the group is to fund new fast food outlets capital expenditure from existing operating cash flows without needing to raise new borrowings.

iii. Revenue growth in the industry is estimated at 4.1% per annum.

iv. It is the company’s policy to increase promotional and advertising spending on new outlets to encourage strong initial sales.

v. The board has accused the management of concentrating on new outlet openings to the detriment of existing outlets.

vi. One of your colleagues, a financial analyst, stated that the company has not been able to pay dividends because of the debit balance on its consolidated retained earnings.

Required:

a. Draft a report addressed to the Managing Director of Pam-Pam Bank Limited analyzing the profitability, cash flows, and investor ratios of Mama-Kitchen PLC. You should also identify and justify matters that you consider will require further investigations.
(13 Marks)

b. Explain the validity or otherwise of your colleague financial analyst’s statement that Mama-Kitchen PLC was unable to pay dividends because of the debit balance on consolidated retained earnings.
(4 Marks)

c. Explain the usefulness and limitations of diluted earnings per share information to investors.
(3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2023 – L3 – SB – Q2 – Consolidated Financial Statements (IFRS 10)"

  • 10 Marks

PSAF – July 2023 – L2 – Q3b – Financial statements discussion and analysis

Compute financial ratios and analyze the financial performance and position of Ghana's Consolidated Fund for 2022 and 2021.

The Financial Statements of the Consolidated Fund of Ghana for the year ended 31 December 2022 and 2021 are presented below:

Consolidated Fund of Ghana – Statement of Financial Performance for the year ended 31 December

Additional Information:

  1. The Statistical and economic data for the two years are as follows:
    • 2022: Population: 30.8 million, Gross Domestic Product (GH¢): 768,000,000,000
    • 2021: Population: 29.5 million, Gross Domestic Product (GH¢): 552,500,000,000
  2. Capital Assets acquired in 2022 and 2021 amounted to GH¢255,200,000,000 and GH¢141,600,000,000 respectively.

Required:

i) Compute the following accounting ratios for the two respective years (2022 and 2021):

  • Debt to Gross Domestic Product
  • Capital Spending as a percentage of Gross Domestic Product
  • Wage Bill as a percentage of Total Tax Revenue
  • Debt per Capita
    (4 marks)

ii) Based on the result in question i) above, write a report discussing and analyzing the Financial Performance and Financial Position of the nation.
(6 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – July 2023 – L2 – Q3b – Financial statements discussion and analysis"

  • 20 Marks

PSAF – Nov 2020 – L2 – Q3 – Public expenditure and financial accountability framework | Financial statements discussion and analysis

Explain the PEFA framework, compute financial ratios for two countries, and analyze their financial performance and position.

a) Public financial management is critical for the successful implementation of government policies and developmental goals. Public financial management is a linchpin that ties together available resources, delivery of services, and achievement of government policy objectives. The need to assess the extent to which public financial management systems operate led to the development of the Public Expenditure and Financial Accountability (PEFA) framework by a coalition of seven international development partners. Since 2001, the PEFA framework has received recognition across the world.

Required:

i) Explain the purpose of the PEFA framework. (3 marks)
ii) Explain the key pillars of an open and orderly public financial management system under the PEFA framework. (7 marks)

b) Country A and Country B are Sub-Saharan African Countries that attained independence around the same period. Presented below are the financial statements of the two countries:

Statement of Financial Performance for the year ended December 31, 2018

Description Country A (GH¢ million) Country B (GH¢ million)
Domestic Tax 26,450 17,000
International trade tax 18,200 21,330
Non-tax revenue 7,500 12,800
Grants 1,300 1,100
Total revenue 53,450 52,230
Compensation for employees 29,800 20,300
Use of goods and services 10,300 14,000
Consumption of fixed capital 240 280
Exchange difference 990 600
Interest 19,660 10,460
Subsidies 510 120
Other expenses 1,600 1,430
Total Expenditure 63,100 47,190
Net Operation Result (9,650) 5,040

Statement of Financial Position as at 31 December 2018

Description Country A (GH¢ million) Country B (GH¢ million)
Non-Current Assets
Property, plant and equipment 2,450 22,400
Equity investment 8,000 5,500
Total Non-Current Assets 10,450 27,900
Current Assets
Receivables 6,700 8,400
Cash and cash equivalent 4,700 18,000
Total Current Assets 11,400 26,400
Total Assets 21,850 54,300
Description Country A (GH¢ million) Country B (GH¢ million)
Funds and Liabilities
Accumulated Fund (80,200) 4,800
Current Liabilities
Payables 6,200 4,100
Trust monies 1,400 900
Domestic debt 16,000 4,500
Total Current Liabilities 23,600 9,500
Non-current Liabilities
Domestic debt 36,000 18,000
External debt 42,450 22,000
Total Non-current Liabilities 78,450 40,000
Total Funds and Liabilities 21,850 54,300

Required:

a) From the information provided, compute for the two countries respectively:
i) Grant to Revenue ratio
ii) Wage Bill to Tax Revenue ratio
iii) Interest to Revenue ratio
iv) Capital Assets ratio
v) Debt to GDP ratio
vi) Capital expenditure per Capita
(4 marks)

b) Based on the result in question (a), write a report discussing and analyzing the financial performance and financial position of the two countries. Include in your report the limitations of the analysis of the two countries. (6 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – Nov 2020 – L2 – Q3 – Public expenditure and financial accountability framework | Financial statements discussion and analysis"

  • 10 Marks

PSAF – Nov 2023 – L2 – Q3b – Public sector fiscal planning and budgeting

Compute and interpret financial ratios for government fiscal performance analysis.

Below is an extract of aggregate fiscal data trend for Government of Ghana for the years 2021 and 2022.

2022 2021
Cash Basis Actual

(GH¢’million)

 Actual

(GH¢’million)
Total Revenue and Grants 26,824 28,865
Taxes 21,744 26,209
Other revenues (Including IGF) 2,391 1,515
Grants 2,689 1,141
Total Expenditure
Recurrent 29,276 36,795
Wages and Salaries 12,917 14,623
Purchases of goods and services 1,388 3,221
Subsidies and Social transfers 25 0
Grants to other Government units 4,267 5,442
Other non-interest expenses 1,604 1,980
Interest 9,075 11,529
Acquisition of non-financial assets 7,134 7,678
Balance (9,586) (15,608)

Statistical and economic data obtained for the two years are as follows:

2022 2021
GDP (GH¢’million) 136,957 167,353
Total population (million) 27.67 28.3

Required:

i) Compute the following financial ratios for 2022 and 2021:

  • Total Revenue to Gross Domestic Product (GDP)
  • Wages and Salaries to Tax Revenue
  • Fiscal Balance to GDP
  • Total Expenditure per capita
  • Capital Expenditure to Total Expenditure

(5 marks)

ii) write a brief report interpreting the results of the ratios computed above

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – Nov 2023 – L2 – Q3b – Public sector fiscal planning and budgeting"

  • 12 Marks

PSAF – Nov 2019 – L2 – Q3b – Public sector fiscal planning and budgeting

Compute and analyze financial ratios for the Consolidated Fund of Ghana for 2017 and 2018.

b) The financial information below relates to the Consolidated Fund of Ghana.

Statement of Financial Position of the Consolidated Fund as at December 31, 2018

Item 2018 (GH¢’million) 2017 (GH¢’million)
Non-Current Assets
Property Plant and Equipment 4,200 5,600
Equity investment 10,000 12,000
Total Non-current assets 14,200 17,600
Current Assets
Work in progress 2,500 2,000
Receivables 1,100 900
Cash and cash equivalent 3,250 2,980
Other assets 450 600
Total current assets 7,300 6,480
Total assets 21,500 24,080
Funds and Liabilities
Accumulated Fund (111,280) (111,620)
Current Liabilities
Payables 1,600 19,000
Trust monies 2,540 2,300
Domestic loans 11,240 12,500
Total Current Liabilities 15,380 33,800
Non-Current Liabilities
Domestic loans 52,000 43,000
External loans 65,400 58,900
Total Non-Current Liabilities 117,400 101,900
Total Funds and Liabilities 21,500 24,080

Additional Information:
i) The total market value of all final goods and services produced domestically in Ghana for 2018 and 2017 fiscal years amounted to GH¢205,100,940,000 and GH¢185,600,400,000 respectively.
ii) According to the Statistical Service data, the population of the country is estimated as 25,000,000 in 2018 and 23,900,000 in 2017.

Required:
i) From the information above, compute for the two financial years, the following ratios:

  • Gross Debt
  • Net Debt percentage
  • Debt per Capita
  • Debt to Gross Domestic Product ratio
  • Total Asset to Debt
  • Capital Asset per Capita (6 marks)

ii) Based on the ratios computed, write a report discussing and analyzing the financial position of the Consolidated Fund to the Head of a “think tank” of a Civil Society Organisation for Financial Accountability. (6 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – Nov 2019 – L2 – Q3b – Public sector fiscal planning and budgeting"

  • 10 Marks

PSAF – Mar 2023 – L2 – Q3b – Financial statements discussion and analysis

Computes and discusses financial ratios to evaluate the performance of a Municipal Assembly over two years.

The Financial Information below relates to Agogo Municipal Assembly.

Agogo Municipal Assembly
Statement of Financial Performance for the year ended 31 December


Additional Information:

  1. The Statistical and economic data of the two years for the Municipal is as follows:
Description 2022 2021
Population 180,000 175,000
  1. Decentralised Transfer includes Common Fund from the Central Government of the respective years. Common Fund constitutes 60% of the Decentralised Transfer for 2022 and 50% of the Decentralised Transfer for 2021.

Required:
i) From the information provided, compute for the respective years:

  • Common Fund per Capita
  • IGF per Capita
  • Compensation of Employees to Total Revenue
  • Interest to IGF Ratio
    (4 marks)

ii) Based on the results computed in i) above, discuss the performance of the Municipal Assembly.
(6 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – Mar 2023 – L2 – Q3b – Financial statements discussion and analysis"

  • 20 Marks

FA – Nov 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculate and interpret financial performance ratios for Edumfa Ltd in comparison to a competitor.

The following summarised information is available in respect of Edumfa Ltd for the year ended 31 July 2022:

The performance ratios for a competitor company for the same period are as follows:

Description Ratio
Return On Capital Employed (ROCE) 25.2%
Asset turnover rate 1.06
Acid test ratio 0.9:1
Return on equity 31.5%
Receivables collection period 38 days

Required:

a) Calculate the performance indicators for Edumfa Ltd as shown for the comparable company. (10 marks)
b) Comment on the performance of Edumfa Ltd for the year ended 31 July 2022 using the information you calculated in (a) above. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – Nov 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

  • 20 Marks

FA – July 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculate financial ratios and discuss ways to improve liquidity for a company using its financial statements.

The following is a summary of the final accounts of Beposo Ltd for the year ended 31 December 2022.


Required:

a) Calculate each of the following ratios (where appropriate, calculations should be to two decimal places).
i) Sales to capital employed (2 marks)
ii) Current ratio (2 marks)
iii) Liquid (acid test) ratio (2 marks)
iv) Interest cover (2 marks)
v) Gearing ratio (2 marks)

b) Explain FOUR (4) ways in which Beposo Ltd could improve its liquidity. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – July 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

  • 20 Marks

FA – Mar 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Distinguishes between capital and revenue expenditure and calculates financial ratios to assess the performance of a business.

a) Distinguish between capital expenditure and revenue expenditure. (5 marks)

b) Banky is the owner of a business supplying goods to other traders. He has just received the financial statement for his business for the year ended 31 December 2022 from his accountant. Below are the summarized financial statements:

Required:

i) Calculate for Banky each of the following ratios for the year ended 31 December 2022 (where appropriate, calculations should be approximated to two decimal places):

  • Net profit margin. (2 marks)
  • Return on capital employed (using the closing year-end value for capital employed) (2 marks)
  • Current ratio. (2 marks)
  • Liquid (acid test) ratio. (2 marks)
  • Rate of inventory turnover. (2 marks)

ii) Based on the ratios calculated in i) above, and all other information provided, assess the performance (profitability) of Banky’s business. (5 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – Mar 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

  • 20 Marks

FA – Dec 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculates and interprets financial ratios to assess the performance of a company over two years.

Below is the formatting of Question 5 from the uploaded document as per your request:

==========
Level:
Level 1

Professional Bodies:
ICAG

Programs:
Professional Program

Subjects:
Financial Accounting (Paper 1.1)

Topics:

  • Interpretation of financial statements (Financial Ratios)

Series:
Dec 2023

Total Marks:
20

Question Tags:
Financial Ratios, Performance Analysis, Profitability, Liquidity, Efficiency

Question Short Summary:
Calculates and interprets financial ratios to assess the performance of a company over two years.

Question:

a) The following summarised information has been extracted from the accounts of Kotoku Ltd for the years ended 31 December 2021 and 31 December 2020:

Statements of Profit and Loss 2021 (GHȼ’000) 2020 (GHȼ’000)
Revenue 1,150 1,766
Cost of sales (684) (1,141)
Gross profit 466 625
Expenses (338) (472)
Interest on loans (26) (33)
Profit before tax 102 120
Tax 30 36
Profit after tax 72 84

Calculate the following ratios for Kotoku Ltd for both years (2020 and 2021):

i) Return On Capital Employed (ROCE) (2 marks)
ii) Asset turnover (2 marks)
iii) Gross profit margin (2 marks)
iv) Acid test ratio (2 marks)
v) Receivables collection period (2 marks)

b) Using the additional information given and the ratios you calculated in part (a), comment on the financial performance of Kotoku Ltd. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – Dec 2023 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@knowsia.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan