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MA – Mar 2025 – L2 – Q1 – Performance analysis

Analyze VAL's 2024 performance in financial, internal efficiency, and external effectiveness using provided data.

Question

========== Question Title: MA – Mar 2025 – L2 – Q1 – Performance analysis
Level: LEVEL 2
Professional Bodies: ICAG
Programs: PROFESSIONAL PROGRAM
Subjects: Management Accounting
Topics: Performance analysis, Financial performance, Internal efficiency, External effectiveness
Series: MARCH 2025
Total Marks: 20
Question Tags: Performance analysis, Financial performance, Internal efficiency, External effectiveness, Revenue calculation, Profitability, Customer satisfaction, Operational efficiency
Question Short Summary: Analyze VAL’s 2024 performance in financial, internal efficiency, and external effectiveness using provided data.

——————————————————————— Question:
QUESTION ONE
Vovome Advisory Limited (VAL) began trading three years ago, on 1 January 2022. It specialises in the provision of expert advice to clients in accountancy, taxation and regulatory compliance. It has a team of professional advisers, each specialising in one of these three areas of advice.
VAL has a target for delivering its services to clients promptly. From the time the client asks for advice, VAL undertakes to provide a formal report to the client within 10 working days.
The following information relates to the financial year ended 31 December 2024:
i) The professional advisers are budgeted to work 220 days each year. They charge GH₵1,400 per day to new clients and GH₵1,200 to established clients.
ii) As a marketing measure intended to win new business, the advisers also give consultations to potential clients on a ‘no fee’ basis. These consultations, which are budgeted to take one day each, are accounted for as business development costs in the marketing budget.
iii) The professional advisers are also required to attend some ‘workshops’ with new clients who are having difficulties with implementing the advice that they have been given by VAL. These workshops, which are also given on a ‘no fee’ basis, are budgeted to last two days.
iv) VAL also has a help desk to provide client support. It responds to telephone and e-mail enquiries from all new and established clients.
v) The team of professional advisers is exactly 50. It is a policy of VAL to limit the team to 50, regardless of the volume of demand for its services.
vi) All professional advisers are paid a salary of GH₵100,000 per year. In addition, they are entitled to share equally in an annual bonus. The bonus is 50% of the amount by which fee income generated exceeds budget minus the revenue forgone as a result of having to give workshops for clients. This revenue forgone is assessed at a notional daily rate of GH₵1,200 per adviser/day.
vii) Operating expenses of the business, excluding salaries of the advisers, were GH₵3,100,000 in 2024. The budget for these expenses was GH₵2,800,000.

Other information:

	Budget 2024	Actual 2024
Professional advisers, by category
Accounting	15	10
Tax	20	20
Compliance	15	20

Enquiries about seeking new advice
New clients	2,600	2,200
Established clients	4,000	3,700

Number of chargeable client days
New clients	2,600	2,750
Established clients	5,100	5,500
Average client days per job	4	4

Mix of chargeable client days
Accounting	1,155	1,650
Tax	1,540	3,300
Compliance	1,155	3,300

The following are actual results for each of the three years 2022-2024

	2022	2023	2024
Number of clients	160	248	347
Number of complaints from clients	50	75	95
Number of accounts in dispute	10	7	5
Support desk: Percentage of calls resolved	86%	94%	97%
Percentage of jobs completed within 10 days	90%	95%	98%
Average time to complete a job (days)	12.6	10.7	9.5
Chargeable client days	7,200	7,750	8,250
Number of consultations (business development)	50	100	150
Number of workshops given	110	135	165
Revenue (GH₵000)	8,920	9,740	?
Net profit (GH₵000)	1,740	1,940	?

Required:
Using the information provided, analyse and discuss the performance of VAL for the year ended 31 December 2024, under the following headings:
a) Financial performance and competitiveness;
b) Internal efficiency; and
c) External effectiveness.

Answer

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Tags: Customer Satisfaction, External effectiveness, Financial Performance, Internal efficiency, Operational Efficiency, Performance Analysis, Profitability, Revenue calculation
Level: Level 2

Topic: External effectiveness
Series: MAR 2025

FR – Mar 2025 – L2 – Q4 – Financial Statement Analysis

Compute adjusted financial ratios for 2022 and 2023, excluding business unit sale, and assess Ben Garzy LTD’s financial performance post-sale and IT system deployment.

Question

Ben Garzy LTD has recently undertaken significant strategic initiatives, including the sale of a key business unit and the implementation of a new information technology (IT) system aimed at enhancing operational efficiency.
Below are excerpts from the company’s most recent financial statements:

Income Statements for the Year ended 31 December

	2023 GH¢’000	2022 GH¢’000
Revenue	45,000	60,000
Cost of Sales	(27,000)	(36,000)
Gross Profit	18,000	24,000
Gain on Sale of Business Unit	2,000	–
Distribution Expenses	(4,000)	(6,000)
Administrative Costs	(5,500)	(3,800)
Finance Costs	(600)	(1,200)
Profit Before Tax	9,900	13,000
Tax Expense	(2,500)	(3,900)
Net Profit	7,400	9,100

Additional Information:

On 1 January 2023, Ben Garzy LTD completed the sale of a business unit for GH¢10 million, resulting in a gain of GH¢2 million. This sale was approved by shareholders, who received a special dividend of GH¢0.50 per share from the proceeds. The business unit’s financial performance included in the 2022 income statement was as follows:

Revenue: GH¢20,000
Cost of Sales: GH¢12,000
Gross Profit: GH¢8,000
Distribution Costs: GH¢1,500
Administrative Expenses: GH¢2,000
Profit Before Interest and Tax: GH¢4,500

During 2023, Ben Garzy LTD deployed an advanced IT system across its operations to enhance efficiency, reduce costs and improve financial reporting accuracy. This development is expected to influence the company’s financial metrics and operational outcomes.
The following financial ratios were calculated for Ben Garzy LTD for the year ended 31 December 2022:
Gross Profit Margin: 40.0%
Operating Profit Margin: 21.7%
Return on Capital Employed (ROCE): 44.38%
Net Asset Turnover: 2.73 times

Required:
a) Compute the comparable financial ratios for Ben Garzy LTD;
i) For the year ended 31 December 2022, excluding the financial contribution of the sold business unit.
(6 marks)
ii) For the year ended 31 December 2023, excluding the gain on the sale of the business unit.
(6 marks)
b) Assess the financial performance and position of Ben Garzy LTD as at 31 December 2023, taking into consideration the effects of the business unit sale and the implementation of the new IT system on the company’s operational efficiency and overall financial health.

Answer

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Tags: Business Unit Sale, Efficiency, Financial Performance, IT System Implementation, Net Asset Turnover, Profitability, Ratio Analysis, ROCE
Level: Level 2

Topic: Financial Statement Analysis
Series: MAR 2025

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

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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

FR – Nov 2024 – L2 – Q4b – Financial Performance Assessment of Acquisition Targets

Assessment of financial performance and position of Suah LTD and Nagbe LTD to assist Dukuly LTD in an acquisition decision.

Question

Dukuly LTD, a public entity, has been expanding through acquisitions. It is assessing two potential acquisition targets, Suah LTD and Nagbe LTD, both operating in the same industry.

The financial statements of Suah LTD and Nagbe LTD for the year ended 30 September 2024 have been provided, along with a set of financial ratios calculated for Suah LTD.

Required:
Using the calculated ratios for Nagbe LTD from Question 4a, assess the relative financial performance and financial position of Suah LTD and Nagbe LTD, to assist the directors of Dukuly LTD in making an acquisition decision.

Answer

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Tags: Financial Position, Gearing, Investment Decision, Liquidity, Performance Evaluation, Profitability, Ratio Analysis
Level: Level 2

Topic: Financial Statement Analysis
Series: Nov 2024

FR – Nov 2024 – L2 – Q4a – Financial Ratios and Performance Evaluation

Calculation of key financial ratios for Nagbe LTD to compare with Suah LTD and evaluate financial performance.

Question

Dukuly LTD, a public entity, has been expanding through acquisitions. It is assessing two potential acquisition targets, Suah LTD and Nagbe LTD, which operate in the same industry. The indicative price for acquiring either entity is GH¢12 million.

The financial statements for Suah LTD and Nagbe LTD are provided as follows:

Statement of Profit or Loss for the year ended 30 September 2024

Item	Suah LTD (GH¢’000)	Nagbe LTD (GH¢’000)
Revenue	25,000	40,000
Cost of Sales	(19,000)	(32,800)
Gross Profit	6,000	7,200
Distribution & Admin Expenses	(1,250)	(2,300)
Finance Costs	(250)	(900)
Profit Before Tax	4,500	4,000
Income Tax Expense	(900)	(1,000)
Profit for the Year	3,600	3,000

Statement of Financial Position as at 30 September 2024

Item	Suah LTD (GH¢’000)	Nagbe LTD (GH¢’000)
Non-Current Assets	4,800	10,300
Current Assets	4,800	8,700
Total Assets	9,600	19,000
Equity	2,600	5,600
Non-Current Liabilities	5,000	9,200
Current Liabilities	2,000	4,200
Total Equity & Liabilities	9,600	19,000

Additional Information:

Carrying Amount of Plant Assets:
- Suah LTD: GH¢4,800,000
- Nagbe LTD: GH¢2,000,000

The following ratios for Suah LTD are provided:

Ratio	Suah LTD
Return on Capital Employed (ROCE)	62.5%
Net Asset Turnover	3.3 times
Gross Profit Margin	24.0%
Profit Margin (Before Interest & Tax)	19.0%
Current Ratio	2.4:1
Inventory Holding Period	31 days
Trade Receivables Collection Period	31 days
Trade Payables Payment Period	24 days
Gearing Ratio	65.80%
Acid Test Ratio	1.6:1

Required:
Using the financial statements provided, calculate the corresponding ratios for Nagbe LTD to compare with Suah LTD.

Answer

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Tags: Efficiency, Financial Statement Interpretation, Gearing, Investment Decision, Liquidity, Profitability, Ratio Analysis
Level: Level 2

Topic: Financial Statement Analysis
Series: Nov 2024

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

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

Question

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)

Answer

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Tags: Efficiency, Financial Ratios, Investor decision, Leverage, Performance Evaluation, Profitability
Level: Level 3

Topic: Emerging Trends in Corporate Reporting

CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

Question

Ehis Marvel, a public company, is a high street retailer that sells clothing and food. The managing director is very disappointed with the current year’s result. The company expanded its operations and commissioned a famous designer to restyle its clothing products. This has led to increased sales in both retail lines, yet overall profits are down.

Extract from the Income Statement for the two years to March 31, 2016, are shown:

Ehis Marvel Plc – Statement of cash flow for the year to March 31, 2016

(ii) The share price of Ehis Marvel Plc averaged N6.00 during the year to March 31, 2015, but was only N3.00 at March 31, 2016.

Required:
Write a report analysing the financials of Ehis Marvel Plc, utilising the above ratios and the information in the statement of cash flows for the two years ended March 31, 2016. Your report should refer to the relative performance of the clothing and food sales and be supported by any further ratios you consider appropriate.

Answer

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Tags: Cash Flow Analysis, Gearing, Inventory Turnover, Liquidity, Profitability, ROCE
Level: Level 3

Topic: Introduction to Corporate Reporting

CR – May 2019 – L3 – Q2 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Assess the accounting treatment of a policy change and analyze the profitability, liquidity, and efficiency ratios of the company based on the financial statements.

Question

Below is the draft financial statement of Lanwani Plc., a manufacturer of fast-moving consumer goods.

Statement of financial position as at

Statement of profit or loss

Additional Information:

The company changed its accounting policy from the cost model to the revaluation model for its property. The revaluation reserve represents the revaluation surplus recognized in 2017. No adjustment was made for 2016.
Development costs of ₦45 billion were capitalized during 2017. The related asset is not expected to generate economic benefits until 2020.

Required:
a. Assess the accounting treatment of the change in accounting policy and state the impact on the return on capital employed (ROCE). (3 Marks)
b. Analyze the profitability, liquidity, and efficiency of Lanwani Plc. (15 Marks)
c. Briefly discuss TWO limitations of the analysis done in (b) above. (2 Marks)

Answer

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Tags: Accounting Policy Change, Efficiency, Liquidity, Profitability, Ratio Analysis, Revaluation
Level: Level 3

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

CR – Nov 2014 – L3 – SC – Q6b – Introduction to Corporate Reporting

Evaluate Luck & Co's financial position and recommend restructuring options to address going concern threats.

Question

Scenario:
Luck & Co. has been making losses over the last few years. Its statement of financial position at 31 December, 2013, showed the following:

Statement of Financial Position as at 31 December, 2013

Assets	N
Property, plant, and equipment	80,000
Inventory	20,000
Receivables	40,000
Total Assets	140,000

Equity and Liabilities	N
Ordinary Capital	100,000
Retained Earnings	(140,000)
Secured Loan Stock	100,000
Payables	80,000
Total Equity & Liabilities	140,000

On liquidation, the assets would realise the following:

Assets	N
Property, plant, and equipment	30,000
Inventory	12,000
Receivables	36,000
Total Realisable Value	78,000

If the company continues to trade for the next four years, profit after charging N20,000 per annum as depreciation on the property, plant and equipment would be as follows:

Year	Profit (N)
2014	4,000
2015	20,000
2016	26,000
2017	28,000
Total	78,000

Assume that there would be no surplus cash to settle the payables and loan stock holders until after four years when inventory and receivables could be realised at their book values.

Required:

Evaluate the financials and advise the management of Luck & Co on the options available to them and redraft the statement of financial position of Luck & Co after the exercise. (9 Marks)

Answer

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Tags: Debt-to-Equity Swap, Financial restructuring, Going Concern, Liquidation, Profitability
Level: Level 3

Topic: Introduction to Corporate Reporting
Series: NOV 2014

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

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

Question

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:

(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)

Answer

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Tags: Financial Ratios, Gearing, Industry comparison, Profitability, Stock Exchange
Level: Level 3

Topic: Strategic Performance Measurement

MA – Mar 2025 – L2 – Q1 – Performance analysis

Analyze VAL's 2024 performance in financial, internal efficiency, and external effectiveness using provided data.

Question

Other information:

	Budget 2024	Actual 2024
Professional advisers, by category
Accounting	15	10
Tax	20	20
Compliance	15	20

Enquiries about seeking new advice
New clients	2,600	2,200
Established clients	4,000	3,700

Number of chargeable client days
New clients	2,600	2,750
Established clients	5,100	5,500
Average client days per job	4	4

Mix of chargeable client days
Accounting	1,155	1,650
Tax	1,540	3,300
Compliance	1,155	3,300

The following are actual results for each of the three years 2022-2024

	2022	2023	2024
Number of clients	160	248	347
Number of complaints from clients	50	75	95
Number of accounts in dispute	10	7	5
Support desk: Percentage of calls resolved	86%	94%	97%
Percentage of jobs completed within 10 days	90%	95%	98%
Average time to complete a job (days)	12.6	10.7	9.5
Chargeable client days	7,200	7,750	8,250
Number of consultations (business development)	50	100	150
Number of workshops given	110	135	165
Revenue (GH₵000)	8,920	9,740	?
Net profit (GH₵000)	1,740	1,940	?

Answer

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Tags: Customer Satisfaction, External effectiveness, Financial Performance, Internal efficiency, Operational Efficiency, Performance Analysis, Profitability, Revenue calculation
Level: Level 2

Topic: External effectiveness
Series: MAR 2025

FR – Mar 2025 – L2 – Q4 – Financial Statement Analysis

Compute adjusted financial ratios for 2022 and 2023, excluding business unit sale, and assess Ben Garzy LTD’s financial performance post-sale and IT system deployment.

Question

Income Statements for the Year ended 31 December

	2023 GH¢’000	2022 GH¢’000
Revenue	45,000	60,000
Cost of Sales	(27,000)	(36,000)
Gross Profit	18,000	24,000
Gain on Sale of Business Unit	2,000	–
Distribution Expenses	(4,000)	(6,000)
Administrative Costs	(5,500)	(3,800)
Finance Costs	(600)	(1,200)
Profit Before Tax	9,900	13,000
Tax Expense	(2,500)	(3,900)
Net Profit	7,400	9,100

Additional Information:

On 1 January 2023, Ben Garzy LTD completed the sale of a business unit for GH¢10 million, resulting in a gain of GH¢2 million. This sale was approved by shareholders, who received a special dividend of GH¢0.50 per share from the proceeds. The business unit’s financial performance included in the 2022 income statement was as follows:

Revenue: GH¢20,000
Cost of Sales: GH¢12,000
Gross Profit: GH¢8,000
Distribution Costs: GH¢1,500
Administrative Expenses: GH¢2,000
Profit Before Interest and Tax: GH¢4,500

During 2023, Ben Garzy LTD deployed an advanced IT system across its operations to enhance efficiency, reduce costs and improve financial reporting accuracy. This development is expected to influence the company’s financial metrics and operational outcomes.
The following financial ratios were calculated for Ben Garzy LTD for the year ended 31 December 2022:
Gross Profit Margin: 40.0%
Operating Profit Margin: 21.7%
Return on Capital Employed (ROCE): 44.38%
Net Asset Turnover: 2.73 times

Answer

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Tags: Business Unit Sale, Efficiency, Financial Performance, IT System Implementation, Net Asset Turnover, Profitability, Ratio Analysis, ROCE
Level: Level 2

Topic: Financial Statement Analysis
Series: MAR 2025

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

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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

FR – Nov 2024 – L2 – Q4b – Financial Performance Assessment of Acquisition Targets

Assessment of financial performance and position of Suah LTD and Nagbe LTD to assist Dukuly LTD in an acquisition decision.

Question

Dukuly LTD, a public entity, has been expanding through acquisitions. It is assessing two potential acquisition targets, Suah LTD and Nagbe LTD, both operating in the same industry.

The financial statements of Suah LTD and Nagbe LTD for the year ended 30 September 2024 have been provided, along with a set of financial ratios calculated for Suah LTD.

Answer

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Tags: Financial Position, Gearing, Investment Decision, Liquidity, Performance Evaluation, Profitability, Ratio Analysis
Level: Level 2

Topic: Financial Statement Analysis
Series: Nov 2024

FR – Nov 2024 – L2 – Q4a – Financial Ratios and Performance Evaluation

Calculation of key financial ratios for Nagbe LTD to compare with Suah LTD and evaluate financial performance.

Question

The financial statements for Suah LTD and Nagbe LTD are provided as follows:

Statement of Profit or Loss for the year ended 30 September 2024

Item	Suah LTD (GH¢’000)	Nagbe LTD (GH¢’000)
Revenue	25,000	40,000
Cost of Sales	(19,000)	(32,800)
Gross Profit	6,000	7,200
Distribution & Admin Expenses	(1,250)	(2,300)
Finance Costs	(250)	(900)
Profit Before Tax	4,500	4,000
Income Tax Expense	(900)	(1,000)
Profit for the Year	3,600	3,000

Statement of Financial Position as at 30 September 2024

Item	Suah LTD (GH¢’000)	Nagbe LTD (GH¢’000)
Non-Current Assets	4,800	10,300
Current Assets	4,800	8,700
Total Assets	9,600	19,000
Equity	2,600	5,600
Non-Current Liabilities	5,000	9,200
Current Liabilities	2,000	4,200
Total Equity & Liabilities	9,600	19,000

Additional Information:

Carrying Amount of Plant Assets:
- Suah LTD: GH¢4,800,000
- Nagbe LTD: GH¢2,000,000

The following ratios for Suah LTD are provided:

Ratio	Suah LTD
Return on Capital Employed (ROCE)	62.5%
Net Asset Turnover	3.3 times
Gross Profit Margin	24.0%
Profit Margin (Before Interest & Tax)	19.0%
Current Ratio	2.4:1
Inventory Holding Period	31 days
Trade Receivables Collection Period	31 days
Trade Payables Payment Period	24 days
Gearing Ratio	65.80%
Acid Test Ratio	1.6:1

Required:
Using the financial statements provided, calculate the corresponding ratios for Nagbe LTD to compare with Suah LTD.

Answer

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Tags: Efficiency, Financial Statement Interpretation, Gearing, Investment Decision, Liquidity, Profitability, Ratio Analysis
Level: Level 2

Topic: Financial Statement Analysis
Series: Nov 2024

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

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

Question

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)

Answer

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Tags: Efficiency, Financial Ratios, Investor decision, Leverage, Performance Evaluation, Profitability
Level: Level 3

Topic: Emerging Trends in Corporate Reporting

CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

Question

Extract from the Income Statement for the two years to March 31, 2016, are shown:

Ehis Marvel Plc – Statement of cash flow for the year to March 31, 2016

(ii) The share price of Ehis Marvel Plc averaged N6.00 during the year to March 31, 2015, but was only N3.00 at March 31, 2016.

Answer

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Tags: Cash Flow Analysis, Gearing, Inventory Turnover, Liquidity, Profitability, ROCE
Level: Level 3

Topic: Introduction to Corporate Reporting

CR – May 2019 – L3 – Q2 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Assess the accounting treatment of a policy change and analyze the profitability, liquidity, and efficiency ratios of the company based on the financial statements.

Question

Below is the draft financial statement of Lanwani Plc., a manufacturer of fast-moving consumer goods.

Statement of financial position as at

Statement of profit or loss

Additional Information:

The company changed its accounting policy from the cost model to the revaluation model for its property. The revaluation reserve represents the revaluation surplus recognized in 2017. No adjustment was made for 2016.
Development costs of ₦45 billion were capitalized during 2017. The related asset is not expected to generate economic benefits until 2020.

Answer

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Tags: Accounting Policy Change, Efficiency, Liquidity, Profitability, Ratio Analysis, Revaluation
Level: Level 3

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

CR – Nov 2014 – L3 – SC – Q6b – Introduction to Corporate Reporting

Evaluate Luck & Co's financial position and recommend restructuring options to address going concern threats.

Question

Scenario:
Luck & Co. has been making losses over the last few years. Its statement of financial position at 31 December, 2013, showed the following:

Statement of Financial Position as at 31 December, 2013

Assets	N
Property, plant, and equipment	80,000
Inventory	20,000
Receivables	40,000
Total Assets	140,000

Equity and Liabilities	N
Ordinary Capital	100,000
Retained Earnings	(140,000)
Secured Loan Stock	100,000
Payables	80,000
Total Equity & Liabilities	140,000

On liquidation, the assets would realise the following:

Assets	N
Property, plant, and equipment	30,000
Inventory	12,000
Receivables	36,000
Total Realisable Value	78,000

If the company continues to trade for the next four years, profit after charging N20,000 per annum as depreciation on the property, plant and equipment would be as follows:

Year	Profit (N)
2014	4,000
2015	20,000
2016	26,000
2017	28,000
Total	78,000

Assume that there would be no surplus cash to settle the payables and loan stock holders until after four years when inventory and receivables could be realised at their book values.

Required:

Evaluate the financials and advise the management of Luck & Co on the options available to them and redraft the statement of financial position of Luck & Co after the exercise. (9 Marks)

Answer

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Tags: Debt-to-Equity Swap, Financial restructuring, Going Concern, Liquidation, Profitability
Level: Level 3

Topic: Introduction to Corporate Reporting
Series: NOV 2014

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

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

Question

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:

(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)

Answer

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Tags: Financial Ratios, Gearing, Industry comparison, Profitability, Stock Exchange
Level: Level 3

Topic: Strategic Performance Measurement

Question Tag: Profitability

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

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Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

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Assess the accounting treatment of a policy change and analyze the profitability, liquidity, and efficiency ratios of the company based on the financial statements.

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Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

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Assess the accounting treatment of a policy change and analyze the profitability, liquidity, and efficiency ratios of the company based on the financial statements.

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