Question Tag: Performance Analysis

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  • 20 Marks

CR – Nov 2016 – L1 – SB – Q3 – Segment Reporting (IFRS 8)

Perform a vertical analysis of segment contributions to the group's financial performance.

Nationwide Plc is a conglomerate with subsidiaries in two geographical locations. Each of the subsidiaries has stamped its foot in relevant subsectors and contributes to the group’s gross earnings. Segment information is prepared on the basis of geographical areas as well as business lines.

Segment Information By Geographical Areas as at December 31, 2012:

Subsidiary I Nigeria (N’m) Europe (N’m) Total (N’m)
Derived From External Customers 110,419 2,375 112,794
Total Revenue 110,419 2,375 112,794
Interest And Similar Expenses (25,398) (271) (25,669)
Operating Income 85,021 2,104 87,125
Share Of Profit Of Equity Accounted Investee 1,850 0 1,850
Operating Expenses (75,507) (1,530) (77,037)
Net Impairment Loss On Financial Assets (2,772) (106) (2,878)
Profit Before Taxation 8,592 468 9,060
Income Tax Credit/(Expense) (1,572) (113) (1,685)
Profit After Taxation 7,020 355 7,375

Assets And Liabilities:

Subsidiary I Nigeria (N’m) Europe (N’m) Total (N’m)
Total Assets 954,165 78,882 1,033,047
Total Liabilities (781,019) (57,630) (838,649)
Net Assets 173,146 21,252 194,398
Subsidiary II Nigeria (N’m) Europe (N’m) Total (N’m)
Derived From External Customers 82,566 2,535 85,101
Total Revenue 82,566 2,535 85,101
Interest And Similar Expenses (34,049) (263) (34,312)
Operating Income 48,517 2,272 50,789
Share Of Profit Of Equity Accounted Investee 952 0 952
Operating Expenses (88,429) (1,468) (89,897)
Net Impairment Loss On Financial Assets (69,525) (3) (69,528)
Profit/(Loss) Before Taxation (108,485) 801 (107,684)
Income Tax Credit/(Expense) 25,346 (213) 25,133
Profit/(Loss) After Taxation (83,139) 588 (82,551)

Assets And Liabilities:

Subsidiary II Nigeria (N’m) Europe (N’m) Total (N’m)
Total Assets 899,434 155,300 1,054,734
Total Liabilities (711,678) (143,684) (855,362)
Net Assets 187,756 11,616 199,372

Required:
You are required to appraise the contributions of each of the geographical locations to the group’s performance through a vertical analysis from the segment information.

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  • 20 Marks

FR – May 2024 – L2 – SB – Q3 – Regulatory Framework for Financial Reporting

Calculation of financial ratios and analysis of Lamido Ltd’s financial performance and position for the year ended December 31, 2022.

Lamido Limited is a courier service company that operates in Nigeria and West Africa.

Initially, Lamido Limited experienced strong growth, but in recent periods the company has been criticised for under-investing in its non-current assets.

Lamido Limited statement of financial position as at December 31:

The following information is also relevant:

  1. Lamido Limited had exactly the same delivery volumes in 2022 as in 2021, with the customer base being the same in both years.
  2. In October 2022, Lamido Limited had to renegotiate its operating licenses in three of its countries of operation. This led to an increase in the fees Lamido Limited had to pay to operate in these countries. The operating licenses in five other countries are due to expire in December 2022, and Lamido Limited is currently negotiating with the concerned authorities of these countries.

You are required to:
a. Calculate the following ratios for the years ended December 31, 2021, and 2022:
i. Operating profit margin
ii. Return on capital employed
iii. Net asset turnover
iv. Current ratio
v. Interest cover
vi. Gearing (Debt/equity)
(6 Marks)

b. Comment on the performance and position of Lamido Limited for the year ended December 31, 2022, and highlight any issues Lamido Limited should consider in the near future. (14 Marks)

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  • 20 Marks

FR – Nov 2021 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Calculate and analyze financial ratios for Onye Nigeria Plc for the years 2019 and 2020.

Below are the statements of financial position of Onye Nigeria Plc as at October 31, 2020, and an extract from the statement of profit or loss for the year ended on that date.

Onye Nigeria Plc
Statement of Financial Position as at October 31, 2020

Item 2020 (N’000) 2019 (N’000)
Non-current assets
Property, plant and equipment 8,325 6,435
Current assets
Inventories 2,880 2,205
Trade receivables 5,535 4,860
Cash and bank 360 540
Total Assets 17,100 14,040
Equity and Liabilities
Equity
Ordinary share capital 3,600 3,600
Retained earnings 5,603 3,938
Non-current liabilities
10% loan notes 3,600 2,700
Current liabilities
Trade payables 3,375 3,105
Bank overdraft 495 360
Taxation 135 90
Accrued expenses 292 247
Total Equity and Liabilities 17,100 14,040

Onye Nigeria Plc
Extracts from Statement of Profit or Loss for the Year Ended October 31

Item 2020 (N’000) 2019 (N’000)
Revenue 50,400 43,875
Cost of sales (38,070) (30,713)
Profit before taxation 2,093 1,440

Additional information:

  1. The profit before tax is after charging:
    Item 2020 (N’000) 2019 (N’000)
    Depreciation 1,620 1,620
    Interest on loan note 360 270
    Interest on bank overdraft 68 41
    Audit fees 54 45
  2. The latest industry average ratios are as follows:
    Ratio Industry Average
    ROCE 18.50%
    Net profit margin 4.73%
    Gross profit margin 35.23%
    Assets turnover 3.91 times
    Current ratio 1.90:1
    Quick ratio 1.27:1
    Trade receivables period 52 days
    Trade payables period 49 days
    Inventory turnover 18.30 times
    Gearing ratio 32.71%

Required:
a. Calculate the above ratios of Onye Nigeria Plc for the years 2019 and 2020. (10 Marks)
b. Analyze the performance and liquidity of Onye Nigeria Plc for the year 2020. (5 Marks)
c. Comment on the limitations of using accounting ratios in financial statement analysis. (5 Marks)

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  • 20 Marks

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

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

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  • 20 Marks

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

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

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

Statement of Profit or Loss for the year ended

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

Statement of Financial Position as at:

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

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

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

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

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  • 15 Marks

FR – MAY 2021 – L2 – Q4a – Performance Analysis

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

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

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

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

Summarised Statement of Financial Position as at 31 December

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

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

 

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  • 5 Marks

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

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

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

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  • 20 Marks

FR – July 2023 – L2 – Q4 – Performance Analysis

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

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

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

Statement of comprehensive income for the year ended 31 December

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

Statement of financial position as at 31 December

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

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

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

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  • 20 Marks

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

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

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

Statement of Comprehensive Income for the year ended 30 November:

Required:

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

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

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

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

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

(3 marks)

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  • 20 Marks

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

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

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

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

Statement of Comprehensive Income for the year 31 December

Additional Information:

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

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

Required:

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

 

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  • 20 Marks

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

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

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

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

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

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

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

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

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  • 5 Marks

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

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

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

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

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

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  • 20 Marks

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)

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  • 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)

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