Nation A and Nation B are West African Nations that attained independence around the same period. Presented below are the financial statements of the two countries.
Statement of financial position as at 31 December 2023
Nation A (GH¢ million)
Nation B (GH¢ million)
Current liabilities
Payables
9,300
6,150
Trust monies
2,100
1,350
Domestic debt
24,000
6,750
35,400
14,250
Non-current liabilities
Domestic debt
54,000
27,000
External debt
63,675
33,000
117,675
60,000
Total fund and liabilities
153,075
74,250
Required:
(a) From the information provided, compute for the two countries respectively:
Grant to Total Revenue ratio;
Wage Bill to Tax Revenue ratio;
Interest to Revenue ratio;
Debt to GDP ratio;
Capital expenditure per Capita; and
Wages bill to Total Expenditure ratio. (b) Based on the result in question (a), write a report discussing and analyzing the financial performance and financial position of the two countries. Include in your report the limitations of the analysis of the two countries.
Peak Enterprises Limited is a small manufacturing company. Its summarized accounts for the last two years are presented below:
Statements of Financial Position as at 31st March
Year 5 (GH¢’000)
Year 6 (GH¢’000)
Fixed Assets
1,130
1,080
Current Assets
Inventory
210
260
Trade Receivables
120
160
Cash
30
–
Total Current Assets
360
420
Total Assets
1,490
1,500
Equity and Liabilities
Equity Shares of GH¢0.25
200
200
Accumulated Profits
680
500
Total Equity
880
700
Medium-Term Bank Loan
200
150
Current Liabilities
Bank Overdraft
140
250
Trade Payables
200
280
Other Payables
70
120
Total Current Liabilities
410
650
Total Equity and Liabilities
1,490
1,500
Statements of Profit or Loss for the Year Ending 31st March
Year 5 (GH¢’000)
Year 6 (GH¢’000)
Sales
1,800
2,900
Gross Profit
210
260
Profit Before Tax
120
160
Taxation
(30)
(40)
Required
(a) Comment on whether there is any evidence that Peak Enterprises Limited is overtrading.
(b) Discuss the implications of overtrading for Peak Enterprises Limited.
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8 Marks
FM – L2 – Q1 – Sources of finance: equity
Calculate and comment on ratios relevant to investors for SunnyCorp, including EPS, PE ratio, dividend yield, dividend cover, interest yield, and gearing.
The following figures have been extracted from the annual accounts of SunnyCorp:
Item
Amount
Issued share capital
1,000,000 ordinary shares of ZAR 1 each, fully paid
Issued debt capital
ZAR 250,000 10% debentures
Reserves
Capital (share premium reserve)
ZAR 200,000
Accumulated profits
Profit and distributions
Profit for the year
ZAR 600,000 (before interest and tax)
Ordinary dividend payments
ZAR 0.20 per share
The current market price of SunnyCorp’s equity shares is ZAR 3.20 each. Its debentures are priced at ZAR 90 per cent. The company’s rate of corporation tax (income tax) is 30%.
Required:
Calculate the ratios that are likely to be of interest to an investor or potential investor in SunnyCorp.
Comment on each:
(8 marks for calculations, 8 marks for comments)
KK is the owner of a business supplying goods to other traders. He has just received the financial accounts for his business for the year ended 31st December 20X8 from his accountant. These are reproduced below.
Statement of profit or loss for the year ended 31st December 20X8
GH¢
GH¢
Sales
Cost of sales
Gross profit
Expenses
Net profit
Statement of financial position as at 31st December 20X8
GH¢
GH¢
Non-current assets (net)
Current assets
Inventory
52,000
Receivables
15,000
Cash
100
Total assets
Current liabilities
Payables
6,000
Bank
2,500
Capital
Balance b/d
200,000
Net profit
30,000
Drawings
(21,400)
Total capital and liabilities
Note: Inventory on 1st January 20X8 was valued at GH¢ 48,000.
Required:
Calculate for KK Enterprises each of the following ratios for the year ended 31st December 20X8 (where appropriate, calculations should be approximated to two decimal places):
(i) Net profit margin.
(ii) Return on capital employed (using the closing year-end value for capital employed).
(iii) Current ratio.
(iv) Liquid (acid test) ratio.
(v) Rate of inventory turnover.
