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Ghana Wind Farms LTD, a State-Owned Enterprise (SOE), has appointed a new Board of Directors in January 2023. The new Board, after settling for a year, is interested in assessing their performance for the year 2023 against the performance of the previous Board in the year 2022 through ratio analysis. Below is the financial statement of Ghana Wind Farms LTD for the two years.
| 2023 (GH¢) | 2022 (GH¢) | |
|---|---|---|
| Revenue | 9,860,000 | 6,218,000 |
| Direct Cost | (5,905,000) | (5,822,000) |
| Gross Profit | 3,955,000 | 396,000 |
| Distribution Costs | (297,000) | (264,000) |
| Administrative Expenses | (505,000) | (455,000) |
| Other Income | 236,000 | 13,000 |
| Other Gains | – | 1,482,000 |
| Operating Profit | 3,389,000 | 1,172,000 |
| Finance Cost | (1,000,000) | (334,000) |
| Profit Before Tax Expense | 2,389,000 | 838,000 |
| Tax Expense | (500,000) | (144,000) |
| Profit After Tax | 1,889,000 | 694,000 |
| 2023 (GH¢) | 2022 (GH¢) | |
|---|---|---|
| ASSETS | ||
| Non-Current Assets | ||
| Property, Plant & Equipment | 17,000,000 | 15,000,000 |
| Investment | 5,000 | 2,000 |
| Advances & Loans | – | 30,000 |
| Total Non-Current Assets | 17,005,000 | 15,032,000 |
| Current Assets | ||
| Inventories | 687,000 | 546,000 |
| Trade and Other Receivables | 2,829,000 | 1,978,000 |
| Prepayments | 87,000 | 42,000 |
| Cash and Cash Equivalents | 383,000 | 434,000 |
| Total Current Assets | 3,986,000 | 3,000,000 |
| TOTAL ASSETS | 20,991,000 | 18,032,000 |
| EQUITY & LIABILITIES | ||
| Equity | ||
| Government Equity | 8,000 | 8,000 |
| Other Government Equity | 613,000 | 306,000 |
| Capital Surplus | 8,471,000 | 7,599,000 |
| Income Surplus | (1,434,000) | 478,000 |
| Total Equity | 7,970,000 | 8,697,000 |
| Non-Current Liabilities | ||
| Deferred Credit | 6,692,000 | 670,000 |
| Deferred Tax Liabilities | 2,498,000 | 2,572,000 |
| Borrowings (Due After One Year) | 1,297,000 | 950,000 |
| Total Non-Current Liabilities | 10,487,000 | 4,192,000 |
| Current Liabilities | ||
| Bank Overdraft | 166,000 | 180,000 |
| Provision for Company Tax | 109,000 | 109,000 |
| Trade and Other Payables | 1,820,000 | 4,516,000 |
| Borrowings (Due Within One Year) | 439,000 | 338,000 |
| Total Current Liabilities | 2,534,000 | 5,143,000 |
| Total Liabilities | 13,021,000 | 9,335,000 |
| TOTAL EQUITY AND LIABILITIES | 20,991,000 | 18,032,000 |
Required:
a) Compute the following ratios:
i) Current Ratio
ii) Quick Ratio
iii) Inventory Turnover (Days)
iv) Trade Receivable Collection Period (Days)
v) Trade Payables Period (Days)
vi) Working Capital Cycle
vii) Interest Cover Ratio
viii) Total Debt – Total Asset Ratio
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Country X and Country Y are Sub-Saharan African Countries that attained independence around the same period. Presented below are the financial statements of the two countries.
Statement of Financial Performance for the year ended 31 December 2020:
| Item Description | Country X (GH¢ million) | Country Y (GH¢ million) |
|---|---|---|
| Revenues | ||
| Domestic tax | 39,675 | 25,500 |
| International trade tax | 27,300 | 31,995 |
| Non-tax revenue | 11,250 | 19,200 |
| Grants | 1,950 | 1,650 |
| Total revenue | 80,175 | 78,345 |
| Expenditure | ||
| Compensation for employees | 44,700 | 30,450 |
| Use of goods and services | 15,450 | 21,000 |
| Consumption of fixed capital | 360 | 420 |
| Exchange difference | 1,485 | 900 |
| Interest | 29,490 | 15,690 |
| Subsidies | 765 | 180 |
| Other expenses | 2,400 | 2,145 |
| Total Expenditure | 94,650 | 70,785 |
| Net Operating Result | (14,475) | 7,560 |
Other Information:
| Item Description | Country X | Country Y |
|---|---|---|
| Population | 30,000,000 | 22,500,000 |
| Gross Domestic Product (GDP) | GH¢ 217,500,000,000 | GH¢ 165,000,000,000 |
Statement of Financial Position as at 31 December 2020:
| Item Description | Country X (GH¢ million) | Country Y (GH¢ million) |
|---|---|---|
| Non-Current Assets | ||
| Property, plant, and equipment | 3,675 | 33,600 |
| Equity investment | 12,000 | 8,250 |
| Total Non-Current Assets | 15,675 | 41,850 |
| Current Assets | ||
| Receivables | 10,050 | 12,600 |
| Cash and cash equivalent | 7,050 | 27,000 |
| Total Current Assets | 17,100 | 39,600 |
| Total Assets | 32,775 | 81,450 |
| Funds and Liabilities | ||
| Accumulated Fund | (120,300) | 7,200 |
| Current Liabilities | ||
| Payables | 9,300 | 6,150 |
| Trust monies | 2,100 | 1,350 |
| Domestic debt | 24,000 | 6,750 |
| Total Current Liabilities | 35,400 | 14,250 |
| Non-Current Liabilities | ||
| Domestic debt | 54,000 | 27,000 |
| External debt | 63,675 | 33,000 |
| Total Non-Current Liabilities | 117,675 | 60,000 |
| Total Fund and Liabilities | 32,775 | 81,450 |
Required:
i) From the information provided, compute for the two countries respectively:
ii) Based on the result in question i), 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. (4 marks)
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The Financial Statements of the Consolidated Fund of Ghana for the year ended 31 December 2022 and 2021 are presented below:
Consolidated Fund of Ghana – Statement of Financial Performance for the year ended 31 December
Additional Information:
Required:
i) Compute the following accounting ratios for the two respective years (2022 and 2021):
ii) Based on the result in question i) above, write a report discussing and analyzing the Financial Performance and Financial Position of the nation.
(6 marks)
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a) Public financial management is critical for the successful implementation of government policies and developmental goals. Public financial management is a linchpin that ties together available resources, delivery of services, and achievement of government policy objectives. The need to assess the extent to which public financial management systems operate led to the development of the Public Expenditure and Financial Accountability (PEFA) framework by a coalition of seven international development partners. Since 2001, the PEFA framework has received recognition across the world.
Required:
i) Explain the purpose of the PEFA framework. (3 marks)
ii) Explain the key pillars of an open and orderly public financial management system under the PEFA framework. (7 marks)
b) Country A and Country B are Sub-Saharan African Countries that attained independence around the same period. Presented below are the financial statements of the two countries:
Statement of Financial Performance for the year ended December 31, 2018
| Description | Country A (GH¢ million) | Country B (GH¢ million) |
|---|---|---|
| Domestic Tax | 26,450 | 17,000 |
| International trade tax | 18,200 | 21,330 |
| Non-tax revenue | 7,500 | 12,800 |
| Grants | 1,300 | 1,100 |
| Total revenue | 53,450 | 52,230 |
| Compensation for employees | 29,800 | 20,300 |
| Use of goods and services | 10,300 | 14,000 |
| Consumption of fixed capital | 240 | 280 |
| Exchange difference | 990 | 600 |
| Interest | 19,660 | 10,460 |
| Subsidies | 510 | 120 |
| Other expenses | 1,600 | 1,430 |
| Total Expenditure | 63,100 | 47,190 |
| Net Operation Result | (9,650) | 5,040 |
Statement of Financial Position as at 31 December 2018
| Description | Country A (GH¢ million) | Country B (GH¢ million) |
|---|---|---|
| Non-Current Assets | ||
| Property, plant and equipment | 2,450 | 22,400 |
| Equity investment | 8,000 | 5,500 |
| Total Non-Current Assets | 10,450 | 27,900 |
| Current Assets | ||
| Receivables | 6,700 | 8,400 |
| Cash and cash equivalent | 4,700 | 18,000 |
| Total Current Assets | 11,400 | 26,400 |
| Total Assets | 21,850 | 54,300 |
| Description | Country A (GH¢ million) | Country B (GH¢ million) |
|---|---|---|
| Funds and Liabilities | ||
| Accumulated Fund | (80,200) | 4,800 |
| Current Liabilities | ||
| Payables | 6,200 | 4,100 |
| Trust monies | 1,400 | 900 |
| Domestic debt | 16,000 | 4,500 |
| Total Current Liabilities | 23,600 | 9,500 |
| Non-current Liabilities | ||
| Domestic debt | 36,000 | 18,000 |
| External debt | 42,450 | 22,000 |
| Total Non-current Liabilities | 78,450 | 40,000 |
| Total Funds and Liabilities | 21,850 | 54,300 |
Required:
a) From the information provided, compute for the two countries respectively:
i) Grant to Revenue ratio
ii) Wage Bill to Tax Revenue ratio
iii) Interest to Revenue ratio
iv) Capital Assets ratio
v) Debt to GDP ratio
vi) Capital expenditure per Capita
(4 marks)
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. (6 marks)
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Financial reporting is not an end in itself but a means to an end. The end game of financial reporting is to provide value to the user of the information. In the local government, financial reporting must deliver the expected value to the users.
i) Explain the objective of financial reporting in the public sector.
ii) Explain the usefulness of financial statements of a Metropolitan Assembly to three of its primary users of the information.
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The Financial Information below relates to Agogo Municipal Assembly.
Agogo Municipal Assembly
Statement of Financial Performance for the year ended 31 December
Additional Information:
| Description | 2022 | 2021 |
|---|---|---|
| Population | 180,000 | 175,000 |
Required:
i) From the information provided, compute for the respective years:
ii) Based on the results computed in i) above, discuss the performance of the Municipal Assembly.
(6 marks)
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In an ideal world, every financial information should be captured in the financial statements to ensure completeness. However, in practice, there exist certain constraints on information included in the general-purpose financial reports.
Required:
Discuss TWO (2) pervasive constraints on the information included in the financial statements.
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Presented below is the Statement of Financial Position of the Consolidated Fund of Ghana as at the year ended 31 December 2021 and 2020.
Consolidated Fund of Ghana
Statement of Financial Position as at 31 December
Required:
i) Prepare a Common Size Statement of Financial Position for the year ended 31 December 2021 and 2020. (6 marks)
ii) Based on the Common Size Statement of Financial Position prepared in (i) above, write a report analyzing the financial position in line with the Recommended Practice Guide 2, Financial Statement Discussion and Analysis. (4 marks)
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Presented below is the Statement of Financial Performance of Okagya Municipal Assembly for the year ended 31 December 2020.
| GH¢’million | 2020 Actual | 2019 Actual | 2020 Budget |
|---|---|---|---|
| Revenues | |||
| Decentralized Transfer | 16,450 | 12,400 | 20,200 |
| IGF | 22,200 | 25,600 | 34,100 |
| Donation and Grants | 1,300 | 1,900 | 2,000 |
| Total Revenue | 39,950 | 39,900 | 56,300 |
| Expenditure | |||
| Compensation for employees | 29,800 | 24,300 | 25,900 |
| Use of goods and services | 10,300 | 9,860 | 18,000 |
| Consumption of fixed Asset | 240 | 220 | 0 |
| Interest | 19,660 | 14,550 | 16,780 |
| Grants | 510 | 430 | 1,920 |
| Other expenses | 1,600 | 1,430 | 2,450 |
| Total Expenditure | 62,110 | 50,790 | 65,050 |
| Net Operation Result | (22,160) | (10,890) | (8,750) |
Required:
i) Prepare a Common Size Statement of Financial Performance for the year ended 31 December 2020.
(6 marks)
ii) Based on the Common Size Statement of Financial Performance prepared in (i) above, write a report analyzing the financial performance of Okagya Municipal Assembly in line with the Recommended Practice Guide 2, Financial Statement Discussion and Analysis.
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Presented below is the Statement of Financial Performance of the Consolidated Fund of Ghana.
Revenue and Expenditure Statement of the Consolidated Fund for the year ended 31 December, 2018
Required:
Based on a Common Size Statement of Financial Performance, write a report discussing and analyzing the financial performance of the Consolidated Fund in line with the Recommended Practice Guide 2, Financial Statement Discussion and Analysis.
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One of the key performance indicators (KPI) in the private sector is to determine the profitability of a business. This is because businesses exist to make a profit. However, in the Public Sector, the objective of governments is to provide public goods and as such, satisfy the needs of the citizens. Citizens are invariably dissatisfied with government performance at the end of its term of office. This is because most of the objectives of government are social in nature and as such, it becomes very difficult to match government revenues and expenditure to determine profit or loss as a basis of measuring its performance.
Required:
Discuss the basis for measuring Public Sector performance and justify why governments can be assessed at the end of their tenure of office.
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