SMM – APR 2023 – L4 – Q1 – 5-Year Marketing Plan Amid High Rates
Develop a comprehensive 5-year marketing plan for a Ghanaian bank to increase assets and maximize profitability in the face of a 28% monetary policy rate and high interbank dollar rate of GHS10.7.
The current Bank of Ghana monetary policy rate is 28% and the average interbank dollar rate of GHS10.7 is considered very high. These have implications for Ghanaian banks’ lending to their customers. In view of these challenges, you have been appointed the new Head of Business Development and your Managing Director has asked you to prepare a 5-year marketing plan to increase your assets portfolio and maximize your profitability. (40 marks)
========== 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.
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.
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.
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:
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.
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.
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)
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.
You're reporting an error for "CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting"
20 Marks
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.
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)
The summarized final accounts of Omosigho Ltd, manufacturer of Aluminum roofing sheets and its accessories, for two years ended December 31, 2013, and 2014 were as follows:
Required:
a. Calculate TWO accounting ratios each that will be of interest to the following stakeholders:
i. Creditors
ii. Management
iii. Shareholders
(15 Marks)
b. Comment briefly on the changes between the ratios arrived at in 2013 and 2014.
(5 Marks)
Abayomi Plc produces and sells two major products, A and B. The budgeted income statement for the year to December 31, 2022 is given below:
The budgeted selling prices of the products are:
A: ₦120
B: ₦180
Required:
a. Determine the breakeven sales in units for each of the products, using the budgeted data. (6 Marks)
Now assume that the following changes are made to the budget:
(i) Unit selling price of product B is reduced to ₦160.
(ii) Direct material cost is expected to drop by 10% for product A and 20% for product B.
(iii) Direct labour costs for each product will increase by 10%.
(iv) Additional ₦456,000 will be spent on advertising.
(v) 80% of total revenue will be derived from product B.
The Board of Directors of Owerri PLC is planning to acquire a controlling interest in Warri Health PLC, a vaccine-producing company, to expand the profitability of the group. Both companies are quoted on the Nigerian Stock Exchange (NSE). The Chief Accountant of Owerri PLC has been given the industrial average and the financial statements of Owerri PLC and Warri Health PLC for the year ended December 31, 2020. This was done to enable the Chief Accountant compute the relevant ratios and evaluate the inherent potentials of the acquisition.
The following comparative ratios of Warri Health PLC and Owerri PLC with the industrial average are provided:
You are required to:
a. Compute the cost of sales ratio and earnings yield (EY) for both companies for the year ended December 31, 2020. (2 Marks)
b. Draft a technical report to the Chief Accountant of Owerri PLC, evaluating and advising on the desirability of acquiring a controlling interest in Warri Health PLC. (13 Marks)
Sekiri Nigeria Limited is a major competitor to Ijor Ventures Limited. Both companies operate in the same industry over the last 20 years.
The summarised financial information of Sekiri Nigeria Limited for the last 2 years is as follows:
Summarised Profit or Loss for the Year Ended September 30:
Description
2019 (N’m)
2018 (N’m)
Revenue
4,565
4,905
Cost of Sales
(2,950)
(3,225)
Gross Profit
1,615
1,680
Selling, Distribution & Admin Expenses
(1,095)
(1,070)
Interest Expense
(95)
(75)
Net Profit Before Taxation
425
535
Taxation
(225)
(260)
Profit for the Year
200
275
Statement of Financial Position as at September 30:
Description
2019 (N’m)
2018 (N’m)
Non-Current Assets:
Intangible Assets
240
200
Tangible Assets (Carrying Amount)
1,080
1,030
Total Non-Current Assets
1,320
1,230
Current Assets:
Inventories
1,470
1,515
Trade Receivables
800
705
Bank
260
290
Total Current Assets
3,850
3,740
Total Assets
5,170
4,970
Equity & Liabilities:
Description
2019 (N’m)
2018 (N’m)
Equity
Ordinary Share Capital
500
500
Retained Earnings
1,730
1,650
Total Equity
2,230
2,150
Non-Current Liabilities
690
690
Current Liabilities:
Trade Payables
375
375
Other Payables
555
525
Total Liabilities
3,850
3,740
Sekiri Nigeria Limited declared dividend of N120m each in years 2018 and 2019
Required:
(a) As the Chief Accountant of Ijor Ventures Limited, write a report to your company’s Finance Director analyzing the performance of Sekiri Nigeria Limited.
(10 Marks)
(b) Highlight FIVE areas that will require further investigation, including reference to other pieces of information that would complement your analysis of the performance of Sekiri Nigeria Limited.
(10 Marks)
Shop First Ltd operates supermarket chains across the sixteen (16) regions of Ghana. The firm has been in commercial operation for more than two decades, growing its operations through an effective supply chain and financial management. However, in the last few years, keen competition and worsening general economic performance have steadied the consistent growths experienced over the years, resulting in the entity disposing off part of its operations. Below are the financial statements of Shop First Ltd:
As the Financial Controller of Adenta Ltd, write a report to the Board of Directors analyzing the financial performance of Adenta Ltd based on a comparison with the industry averages. (10 marks)
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.
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)
