- 20 Marks
PSAF – L2 – Q13.5 – Financial Statements Analysis
Question
Consolidated Fund of Ashanti
Statement of financial position as at 31 December
| 2021 GH¢’ | 2020 GH¢’ | |
|---|---|---|
| ASSETS | ||
| Non-current asset | ||
| Property, plant and equipment | ||
| Financial assets | ||
| Total non-current assets | ||
| Current asset | ||
| Inventory | ||
| Cash and cash equivalents | ||
| Current liabilities | ||
| Payables | ||
| Deposits and trust monies | ||
| Total current liabilities | ||
| NET ASSETS | ||
| FINANCED BY: | ||
| Accumulated fund | ||
| Non-current liabilities | ||
| Domestic debt | ||
| External debt |
Required:
(a) Prepare a common size statement of financial position for the Consolidated Fund of Ashanti for 2021 and 2022. (10 marks)
(b) Write a report analyzing the common size statement of financial position, discussing the financial position of the Consolidated Fund for 2021 and 2022.
Answer
Consolidated Fund of Ashanti
Common size statement of financial position as at 31 December
| 2022 % | 2021 % | |
|---|---|---|
| ASSETS | ||
| Non-current asset | ||
| Property, plant and equipment | 65.51 | 64.42 |
| Financial assets | 20.15 | 22.48 |
| Total non-current assets | 85.66 | 86.90 |
| Current asset | ||
| Inventory | 2.38 | 1.53 |
| Cash and cash equivalents | 11.96 | 11.57 |
| Total current assets | 14.34 | 13.10 |
| Current liabilities | ||
| Payables | 9.03 | 3.77 |
| Deposits and trust monies | 8.21 | 8.99 |
| Total current liabilities | 17.24 | 12.76 |
| NET ASSETS | 82.76 | 87.24 |
| FINANCED BY: | ||
| Accumulated fund | 15.21 | 15.91 |
| Non-current liabilities | ||
| Domestic debt | 34.11 | 36.89 |
| External debt | 33.44 | 34.44 |
| Total non-current liabilities | 67.55 | 71.33 |
| Total financing | 82.76 | 87.24 |
Report: Analysis of the Consolidated Fund of Statement of Financial Position
Introduction
This provides a common size comparative analysis of the Consolidated Fund for 2021 and 2022.
Analysis and Discussion
In the case of the assets, as shown with the computation above, it could be observed that Property, Plant, and Equipment (PPE) as well as financial assets are the major assets of the government in the years 2021 and 2022. These two assets represent 86.90% and 85.66% of the total assets in 2021 and 2022 respectively. It could be seen that government investment in both assets slightly decreased in the year 2022.
Again, government investment in inventories represents a smaller proportion of the entire assets in these years.
Cash balance in relation to total assets of the government slightly increased from 11.53% in relation to total assets in 2021 to 11.96% in relation to total assets in 2022. This could mean the government used portions of bank and cash balance for acquiring some PPE and equity investment in 2021, and they yielded some returns in 2022.
On the side of liabilities, domestic and external loans continue to represent a great proportion of government liabilities. They represent 71.33% and 67.55% in relation to total assets of 2021 and 2022 respectively. In 2022, government public debt decreased, probably because some loans matured and were settled. Short-term payables increased from 12.76% in relation to total assets in 2021 to 17.24% in relation to total assets in 2022. This could imply that the government did not honor a greater proportion of its obligations in 2022.
Conclusion
In conclusion, the Consolidated Fund statement of financial position appears strong from 2021 to 2022, but the government needs to strategize to settle the huge public debt.
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