Question Tag: Profitability

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  • 20 Marks

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)

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  • 20 Marks

CSMCE – APR 2024 – L2 – Q6 – Relationship Marketing

Definition and importance of relationship marketing in financial services, with four reasons.

a) Define Relationship Marketing. [4 marks]

b) Explain, giving four (4) reasons, why Relationship Marketing is important in the Marketing of Financial Services. [16 marks]

[Total: 20 marks]

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  • 20 Marks

MA – Mar 2025 – L2 – Q1 – Performance analysis

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

========== 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.

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  • 20 Marks

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.

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:

  1. 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
  1. 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.
  2. 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.

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  • 6 Marks

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

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

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:

  1. The total number of equity shares outstanding was 1.2 million and 1.4 million at 30 June 2023 and 30 June 2024 respectively.
  2. 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.
  3. Non-current liabilities at 30 June 2023 and 30 June 2024 amounted to GH¢250,800 and GH¢308,510 respectively.
  4. 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:

  1. Operating profit margin
  2. Return on parent’s equity
  3. Earnings per share
  4. Current ratio
  5. Trade receivables days
  6. Total liabilities to total assets %

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  • 10 Marks

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.

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.

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  • 10 Marks

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.

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:

  1. Carrying Amount of Plant Assets:

    • Suah LTD: GH¢4,800,000
    • Nagbe LTD: GH¢2,000,000

  2. 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.

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  • 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)

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  • 20 Marks

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

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

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.

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  • 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:

  1. 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.
  2. 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)

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  • 20 Marks

PM – May 2019 – L2 – Q3 – Divisional Performance Measurement

Calculate and analyze ROCE for Peterpan's subsidiaries and discuss performance excluding intra-group transactions.

Peterpan Nigeria Limited is a holding company with two subsidiaries manufacturing similar products in different regions of the country. These are Peterpan (Eastern) Nigeria Limited and Peterpan (Western) Nigeria Limited. Return on capital employed (ROCE) is used as the group’s performance measure and is also used to determine divisional managers’ bonuses. The results of the two companies and of the holding company for the year ended 31 December, 2018, and the statement of financial position as at that date are as follows:

Item Western (₦000) Eastern (₦000) Peterpan (₦000)
Revenue 400,000 440,000 792,941
Cost of sales (340,000) (330,000) (630,000)
Gross profit 60,000 110,000 162,941
Administrative costs (20,000) (60,000) (80,000)
Interest payable (20,000) – (20,000)
Pre-tax profit 20,000 60,000 62,941

Non-current assets:

Item
Original cost 2,000,000 300,000 3,000,000
Accumulated depreciation (1,180,800) (320,000) (2,213,568)
Net book value 819,200 120,000 786,432
Net current assets 100,000 120,000 906,432
Total assets 919,200 906,432 1,825,632
Non-current borrowings 300,000 – 300,000
Shareholders’ fund 619,200 786,432 1,525,632
Capital employed 919,200 906,432 1,825,632

Additional Information:

  1. During the year, Eastern Limited sold goods to Western Limited that had cost Eastern Limited ₦20,000,000. The transactions relating to this sale have been eliminated from the holding company’s results stated above.
  2. Both companies use the same depreciation policy of 20% per annum on a reducing balance basis for their non-current assets. Neither company made any additions or disposals of non-current assets during the year.
  3. During the last board meeting of the holding company, it was decided that the holding company should impose a transfer pricing policy for transfers between the two subsidiaries.

Required:

a. Calculate the return on capital employed (ROCE) ratios for each of the two subsidiaries for the year and analyze these into their secondary ratio components of: i. Pre-Tax Profit % ii. Asset Turnover (3 Marks)

b. i. Calculate Eastern Limited’s gross profit margin on its internal sales and compare this to the gross profit margin on its external sales. (2 Marks)
ii. Discuss the performance of the two subsidiaries excluding the effects of the intra-group transactions. (9 Marks)

c. Explain THREE factors that management should consider when setting the transfer pricing policy. (6 Marks)
(Total 20 Marks)

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  • 20 Marks

PM – Nov 2018 – L2 – Q3 – Working Capital Management

Prepare cash forecast, profitability, and liquidity ratio for Omegboeji Nigeria Ltd from 2015-2017.

Omegboeji Nigeria Limited is a trading company that specialises in buying and selling of bulk oil. The company is financed by a capital base of N24 million inclusive of reserves in a mix of 30% and 70% of debt and equity respectively. The company has been in the trading business for the past six years and has consistently adhered to its corporate policy on sales, purchases, and inventory management.

The company’s policy on sales is to ensure that sales proceeds are collected as follows:
(i) Cash Sales is 30% of the monthly sales.
(ii) The balance of the month’s sales is to be collected in the month following sales.

The policy on monthly purchases, which is in agreement with the supplier’s policy, is to pay for all supplies in the month following the month of purchase. The general policy of the company is that purchase cost for bulk oil represents 60% of the corresponding annual sales value while its inventory policy is to reserve 30% of the month’s purchases as closing inventory.

The following information is available for the five years 2013 to 2017:

Year Monthly Sales (N’000) Monthly Salaries (N’000) Monthly Rent (N’000) Monthly Expenses (N’000)
2013 12,000 800 400 350
2014 15,000 800 400 370
2015 16,800 960 400 390
2016 18,000 960 400 390
2017 24,000 1,080 400 380

Additional information:
(i) The company will purchase a motor vehicle in July 2016, which will be paid for in two instalments as follows:

  • First payment: 60% of cost in September 2016
  • Balance: To be paid in November 2016
    The cost of the motor vehicle is expected to be N7,500,000.

(ii)Annual depreciation for the motor vehicle will be 20% on a straight-line basis. Monthly expenses include annual depreciation for the motor vehicle.

(iii) The cash balance as of December 31, 2014, was N2,500,000.

(iv) The company’s salaries, rent, and expenses will be paid in the month during which they are due.

Required:
a. Prepare a cash forecast for 2015, 2016, and 2017, showing the closing cash balance at each year-end. (10 Marks)

b. Prepare a forecast profitability statement for 2015, 2016, and 2017. (7 Marks)

c. Determine and comment on the forecast liquidity ratio (current ratio) for 2017. (3 Marks)

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  • 16 Marks

FR – Nov 2018 – L2 – SB – Q4a and Q4b – Presentation of Financial Statements (IAS 1)

Calculate the financial ratios for Adebayo Trading Company Plc for the years 2018 and 2017 and comment on the profitability and short-term liquidity of Adebayo Trading Company Plc based on calculated ratios.

The following financial statements were extracted from the books of Adebayo Trading Company Plc for the relevant years:

Statement of Profit or Loss and Other Comprehensive Income for the year ended March 31:

Item 2018 (N’000) 2017 (N’000)
Revenue 250,000 400,000
Cost of sales (137,500) (225,000)
Gross profit 112,500 175,000
Administrative expenses (36,050) (44,500)
Distribution expenses (20,200) (24,250)
Finance cost (3,125) (3,125)
Profit before tax 53,125 103,125
Taxation expense (20,000) (40,000)
Profit for the year 33,125 63,125

Statement of Financial Position as at March 31:

Item 2018 (N’000) 2017 (N’000)
Non-current assets:
At cost 136,500 196,000
Accumulated depreciation (36,500) (52,250)
Net non-current assets 100,000 143,750
Current assets:
Inventory 79,250 20,750
Trade receivables 50,000 12,500
Bank balance 12,000 91,750
Total current assets 141,250 125,000
Equity and Liabilities:
Equity
Ordinary shares of 50 kobo each 57,500 57,500
Retained earnings 43,000 25,000
Total equity 100,500 82,500
Non-current liabilities:
10% Loan notes 31,250 31,250
12% Redeemable preference shares – 5,000
Total non-current liabilities 31,250 36,250
Current liabilities:
Trade payables 18,750 26,875
Taxation 60,000 40,000
Bank overdraft 30,750 83,125
Total current liabilities 109,500 150,000
Total equity and liabilities 241,250 268,750

Additional Information:
(i) Dividend paid to Equity holders: N15,125,000 (2018) and N21,375,000 (2017).
(ii) Drop in market price per share: 36 kobo (2017) to 24 kobo (2018).
(iii) Finance cost relates to interest paid on 10% loan notes.

Required:
(a) Calculate in columnar form, for the two relevant years the following financial ratios:

  • Return on capital employed (ROCE)
  • Net profit margin (use profit after tax)
  • Current ratio
  • Quick ratio
  • Debt ratio
  • Fixed interest cover
  • Dividend cover
  • Dividend yield
    (12 Marks)

(b) Comment on the profitability and short-term liquidity of the company based on the ratios calculated.
(4 Marks)

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  • 6 Marks

BMF – Nov 2019 – L1 – SB – Q2b – Investment Decisions

Explain limitations of financial objectives and ways to assess performance.

(b) THREE commonly-used financial objectives of a firm are to maximise shareholders’ wealth, profitability, and growth in earnings per share. However, these three objectives have some limitations hence the saying ‘no financial target on its own is ideal’.

(i) Explain the limitations of these THREE financial objectives of the firm. (6 Marks)
(ii) State and explain THREE ways by which financial performance of a firm might be assessed. (6 Marks)

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  • 1 Marks

MI – May 2017 – L1 – SA – Q11 – Cost-Volume-Profit (CVP) Analysis

Identify the definition of Margin of Safety in value.

The margin of safety in value is expected to be:
A. Sales less profit at break-even point
B. Sales less cost at break-even point
C. Cost less cost at break-even point
D. Sales less sales at break-even point
E. Profit less profit at break-even point

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  • 20 Marks

FR – March 2023 – L2 – Q4 – Financial Statement Analysis

Analyze and compare the financial performance of Boomu Ltd and Sintim Ltd using profitability, liquidity, efficiency, and gearing ratios.

Boomu Ltd is an agro-processing company with strong competition from Sintim Ltd. The Board of Directors of Boomu Ltd wants to measure the performance of the company against its competitor. Below are the statement of comprehensive income of the two companies for the year ended 31 December 2021, and the statement of financial positions as at that date.

Statement of Comprehensive Income:

Boomu Ltd (GH¢000) Sintim Ltd (GH¢000)
Revenue 619,085 956,200
Cost of Sales (424,700) (762,400)
Gross Profit 194,385 193,800
Administrative Expenses (58,635) (84,940)
Other Income 6,335 9,270
Operating Profit 142,085 118,130
Finance Cost – (3,000)
Profit Before Income Tax 142,085 115,130
Income Tax Expense (23,460) (34,220)
Profit for the Year 118,625 80,910

Statement of Financial Position:

Boomu Ltd (GH¢000) Sintim Ltd (GH¢000)
Non-Current Assets
Property, Plant & Equipment 231,636 197,884
Intangible Assets 105,320 111,928
Total Non-Current Assets 336,956 309,812
Current Assets
Inventories 33,960 37,480
Trade Receivables 26,216 3,836
Cash and Cash Equivalents 91,328 42,472
Total Current Assets 151,504 83,788
Total Assets 488,460 393,600

Equity & Liabilities:

Boomu Ltd (GH¢000) Sintim Ltd (GH¢000)
Equity
Share Capital 20,000 30,000
Retained Earnings 390,536 283,820
Total Equity 410,536 313,820
Non-Current Liabilities
Deferred Taxation 18,120 13,948
20% Loan Notes – 30,000
Total Non-Current Liabilities 18,120 43,948
Current Liabilities
Trade and Other Payables 42,904 28,040
Current Tax 16,900 7,792
Total Current Liabilities 59,804 35,832
Total Equity & Liabilities 488,460 393,600

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 using THREE (3) profitability ratios, TWO (2) liquidity ratios, THREE (3) efficiency ratios, and TWO (2) gearing ratios.

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  • 20 Marks

MI – May 2016 – L1 – SB – Q3 – Cost-Volume-Profit (CVP) Analysis

Perform various CVP calculations including break-even point, profit, margin of safety, and contribution for a product.

HEALTH-GRACE limited produces one standard product called Bambino Syrup which sells at ₦20.00 per bottle. The trading results for the six months ended June 30, 2015 were as follows:

Month Sales (Units) Profit / Loss (₦)
January 120,000 80,000
February 140,000 120,000
March 60,000 (40,000)
April 96,000 32,000
May 104,000 24,000
June 72,000 16,000

From the above information, you are required to calculate the following:

a. Break-even point in units and Naira value. (2 Marks)
b. Fixed cost. (2 Marks)
c. Variable cost per unit. (8 Marks)
d. Profit volume ratio. (2 Marks)
e. Contribution, assuming 70,000 bottles are sold. (2 Marks)
f. Margin of safety assuming 90,000 bottles are sold. (1 Mark)
g. The number of bottles to be sold to generate a profit after tax of ₦70,000 assuming the tax rate is 30%. (3 Marks)

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  • 9 Marks

FR – Nov 2023 – L2 – Q4b – Financial Statement Analysis

Write a report analyzing the performance of two companies, Addin Petroleum and Gyan Petroleum, using key financial ratios.

Write a report to the Chairperson of the board based on a comparative analysis of the performance of both companies using the ratios computed in (a) above.

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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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  • 9 Marks

FR – May 2017 – L2 – Q4b – Financial Statement Analysis

Write a report analyzing the performance of Shine Ltd compared to Diamond Ltd and the industry averages based on profitability, liquidity, gearing, and efficiency.

As the Financial Controller of Shine Ltd, write a report to the Managing Director analyzing the performance of your company, comparing the results against that of Diamond Ltd (a key competitor) and against the industry average using the following measures:

  • Profitability
  • Liquidity
  • Gearing
  • Efficiency

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