Tag (SQ): Profitability

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  • 20 Marks

FM – L2 – Q45 – Economic and regulatory environment

Explain five differences between public and private sector entities in an economy.

(A). Explain FIVE differences between public sector entities and private sector entities.

(B). Explain the differences between public goods and services and private goods and services.

(C). Explain the distinguishing features of public enterprises.

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  • 15 Marks

MA – L2 – Q72 – Performance Analysis

Analyze Nexus Enterprises' financial performance using ratios and metrics for Years 1, 3, and 4 (forecast).

The financial performance of Nexus Enterprises is summarised below. ‘Now’ is the end of Year 3.

Year 1 Year 3 Year 4 (forecast)
Cost of sales/Sales 63% 70% 70%
Marketing costs/sales 9% 6% 5%
Distribution costs/sales 13% 8% 6%
Administration costs/sales 2% 2% 2%
Interest charges/Sales 0% 4% 8%
Operating profit/sales 13% 10% 9%
Loans/Sales revenue 0% 50% 67%
Inventory/Sales 10% 14% 18%
Sales/Non-current assets 4.7 times 1.9 times 1.2 times
Average sales per employee 600,000 1,032,000 686,000,000
Average sales per product 281,000 185,000 234,000
Average sales per supplier 750,000 726,000 651,000

Required:
Use this information to evaluate the financial performance of Nexus Enterprises.

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  • 8 Marks

MA – L2 – Q58 – Performance analysis

Calculate and define financial ratios for Akwasi and Kofi, two manufacturing companies, using their financial statements.

The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.

Statement of profit or loss for Akwasi

ZC¢
Revenue 150,000
Cost of sales (60,000)
Gross profit 90,000
Interest payable (500)
Distribution costs (13,000)
Administrative expenses (15,000)
Profit before tax 61,500
Income tax expense (16,605)
Profit for the period 44,895

Statements of financial position for Akwasi and Kofi

Akwasi Kofi
ZC¢ ZC¢
Assets
Non-current assets
Property 280,000
Plant and equipment 190,000 500,000
190,000 780,000
Current assets
Inventories 12,000 26,250
Trade receivables 37,500 105,000
Cash at bank 22,000
49,500 153,250
Total assets 240,000 933,250
Equity and liabilities
Equity
Share capital 156,000 174,750
Retained earnings 51,395 390,830
207,395 565,580
Non-current liabilities
Long-term debt 10,000 250,000
Current liabilities
Trade payables 22,605 117,670
Total equity and liabilities 240,000 933,250

Required:

Define and calculate the following ratios for each company:

(a) Gross profit percentage (2 marks)

(b) Net profit percentage (2 marks)

(c) Return on capital employed (2 marks)

(d) Asset turnover (2 marks)

The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.

Statement of profit or loss for Akwasi

ZC¢
Revenue 150,000
Cost of sales (60,000)
Gross profit 90,000
Interest payable (500)
Distribution costs (13,000)
Administrative expenses (15,000)
Profit before tax 61,500
Income tax expense (16,605)
Profit for the period 44,895

Statements of financial position for Akwasi and Kofi

Akwasi Kofi
ZC¢ ZC¢
Assets
Non-current assets
Property 280,000
Plant and equipment 190,000 500,000
190,000 780,000
Current assets
Inventories 12,000 26,250
Trade receivables 37,500 105,000
Cash at bank 22,000
49,500 153,250
Total assets 240,000 933,250
Equity and liabilities
Equity
Share capital 156,000 174,750
Retained earnings 51,395 390,830
207,395 565,580
Non-current liabilities
Long-term debt 10,000 250,000
Current liabilities
Trade payables 22,605 117,670
Total equity and liabilities 240,000 933,250

Required:

Define and calculate the following ratios for each company:

(a) Gross profit percentage (2 marks)

(b) Net profit percentage (2 marks)

(c) Return on capital employed (2 marks)

(d) Asset turnover (2 marks)

The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.

Statement of profit or loss for Akwasi

ZC¢
Revenue 150,000
Cost of sales (60,000)
Gross profit 90,000
Interest payable (500)
Distribution costs (13,000)
Administrative expenses (15,000)
Profit before tax 61,500
Income tax expense (16,605)
Profit for the period 44,895

Statements of financial position for Akwasi and Kofi

Akwasi Kofi
ZC¢ ZC¢
Assets
Non-current assets
Property 280,000
Plant and equipment 190,000 500,000
190,000 780,000
Current assets
Inventories 12,000 26,250
Trade receivables 37,500 105,000
Cash at bank 22,000
49,500 153,250
Total assets 240,000 933,250
Equity and liabilities
Equity
Share capital 156,000 174,750
Retained earnings 51,395 390,830
207,395 565,580
Non-current liabilities
Long-term debt 10,000 250,000
Current liabilities
Trade payables 22,605 117,670
Total equity and liabilities 240,000 933,250

Required:

Define and calculate the following ratios for each company:

(a) Gross profit percentage

(b) Net profit percentage

(c) Return on capital employed

(d) Asset turnover

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  • 18 Marks

MA – L2 – Q57 – Performance analysis

Evaluate KINTAMPO LTD's performance using financial ratios for two divisions, Amir and Mo.

Zestco is an importer and retailer of vegetable oils. Extracts from the financial statements for this year and last are set out below.

Statements of profit or loss for the years ended 30 September

Year 7 Year 6
ZC¢’000 ZC¢’000
Revenue 2,160 1,806
Cost of sales (1,755) (1,444)
Gross profit 405 362
Distribution costs (130) (108)
Administrative expenses (260) (198)
Profit before tax 15 56
Income tax expense (6) (3)
Profit for the period 9 53

Statements of financial position as of 30 September

Year 7 Year 6
ZC¢’000 ZC¢’000
Assets
Non-current assets
Property, plant and equipment 78 72
Current assets
Inventories 106 61
Trade receivables 316 198
Cash 6
428 259
Total assets 506 331
Equity and liabilities
Equity
Ordinary shares 110 85
Preference shares 23 11
Share premium 15
Revaluation reserve 20
Retained earnings 78
Current liabilities
Bank overdraft 49
Trade payables 198
Current tax payable 7
Total equity and liabilities

Required:

Define and calculate the following ratios for each year:

(a) Gross profit percentage

(b) Net profit percentage

(c) Return on capital employed

(d) Asset turnover

(e) Current ratio

(f) Quick ratio

(g) Average receivables collection period

(h) Average payables period

(i) Inventory turnover.

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