Financial statement analysis is everybodys business. Its importance cut across many disciplines in both academia and industry. Showing a good understanding and interpreting financial statement has therefore become relevant in the study of Business Finance. Your task under this section is to analyze the financial statements of two selected firms and write a report on the performance of the firms to be presented to potential investors using the guidelines below. 1. Download the file Financial statement.xls as attached to the additional files on the UPSA Virtual Platform. Alternatively, follow the link provided below to assess financial statement of two firms: Armcor PLC and Sealed Air PLC listed on the S&P 500. The financial statements comprise of separate Balance Sheet and Income Statement for the two companies. https://drive.google.com/open?id=16VDq53Q3vgkubKUcO7JyI96Vxsw22Vul 2. Visit Yahoo! Finance at http://finance.yahoo.com/ to read more about the two companies Required A. Write a short description of Armcor PLC main line of business only. Be sure to include the following details

i. ii. The stocks most recent price, trade date, and trade time. A description of the highest and lowest prices the stock has reached in the past year. The companys market capitalization, price-earnings (P/E) ratio, and its price-to book ratio. Describe what each ratio means. (5 marks)

iii.

B. Use the balance sheet and income statement data you gathered to complete this section for both Armcor PLC and Sealed Air PLC.

i. Complete a simple financial statement analysis of the two companies (calculating and discussing at least two ratios under each Liquidity, Profitability, Leverage,

Market/Investment and Efficiency ratios). (20 marks)

ii. Analyze the results of the two companies. Your discussion should focus on the

changes in relation to the ratios computed in 2(a) above.(5 marks)

The table below suggest possible financial ratios that can be calculated. Students can select two ratios under each heading.

LIQUIDITY RATIO Armcor PLC Sealed Air PLC

Cash Ratio

Current Ratio

Acid T est Ratio

LEVERAGE RATIO

Total Debt ratio

Debt/Equity Ratio

Debt/Equity Ratio (approximated)

PROFITABILITY

Gross profit margin

Net Profit Margin

Operating Income margin

EFFICIENCY RATIO

Inventory turnover Period

Trade Receivable period

Trade Payable Period

MARKET/INVESTMENT RATIO

EPS

P/E ratio

Interest cover ratio

Dividend Cover ratio

I O A wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In 2 2 / 7 100% je to Share Zoom out (Ctrl+Minus) QUESTION 1 Below are the statements of financial position of three companies as at 31 December 2017. Bauble Jewel Gem Co Co GHS'000 GHS'000 GHS'000 V Non-current assets 60 75 HI Property, plant and equipment Investments in group companies 100 720 185 905 175 160 75 Current assets 90 85 1,080 250 160 Equity Share capital - GHC1 ordinary shares Retained earnings 400 560 960 100 90 50 70 115 40 190 Current liabilities 60 1:41 AM Saturday 23-May-20 120 1,080 250 160 You are also given the following information: 1 wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help | O JI Home Tools wendy.pdf X Sign In A 3/7 100% to Share vii. In addition, on 28 December 2017, Gem processed the sale of GHS1,500 of goods to Bauble, which Bauble did not account for until their receipt on 2nd January 2018. The in-transit reconciliation should be achieved by assuming the transaction had been recorded in the books of Bauble before the year end. At 31st December 2017, Gem had a trade receivable balance in the current assets of GHS2,000 due from Bauble which differed to the equivalent balance in Bauble's books due to the sale made on 28 December 2017. viii. It is the group's policy to value the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary's identifiable net assets. Required V Prepare the consolidated statement of financial position for Bauble Co and its subsidiaries as at 31st December 2017. (20 Marks) HI 2 QUESTION 2 Issah Mohammed is the director of FTG Printing Ltd. The Company that has traded 20 years in Ghana and had achieved very good levels of growth and return on capital in the past, is now changing. In recent time it has failed to introduce new product lines, relying on traditional products and little has been invested in Research or Product Development. 1:41 AM Saturday 23-May-20 You are a business planning consultant for a firm of Management Consultants. FTG Printing Ltd is one of your clients. In recent times the business has experienced increased turnover but a downturn in overall performance. 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf Sign In A 317 100% to Share Issah Mohammed who is the director of FTG Printing has had a meeting with your Director and he has stated that he wants to introduce tighter management control within the company by introducing a system of responsibility accounting You receive the following memo from your Director, Rash Rooney, regarding this case. Memorandum To: Business Planning Assistant V Date:18th May, 2020. HI From: Rash Rooney, Director Subject: FTG Printing accounts information. You are aware that I met with Issah Mohammed yesterday and that he is concerned with the latest results shown in the final accounts that have recently been prepared at year end. Page 3 of 7 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf Sign In A 4 / 7 100% DO to Share The file attached contains a summary of the company's abbreviated income statements and statement of financial positions for the past three years, together with additional information and performance indicators for their business sector for the period under review. Examine this information and present of a detailed financial analysis of the company over the three-year period. Signed: Rash Rooney V Financial information on FTG Printing Ltd. HI Summary income statements GHSm GHSm GHSm 2017 2018 2019 Sales turnover 14.70 15.90 19.80 12.51 13.29 17.46 Operating costs Operating profit before tax 2.19 2.61 2.34 Taxation 0.72 0.90 0.81 1:42 AM Saturday 23-May-20 Profit after tax 1.47 1.71 1.53 Dividends 0.36 0.48 0.48 1 Retained profit 1.11 1.23 1.05 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 4 / 7 O 100% to Share N.B. The firm's detailed breakdown of costs in GHSm is as follows: Years 2017 2018 2019 Labour costs 2.79 2.94 3.75 Distribution costs 1.32 1.47 1.83 Administration costs 0.57 0.66 0.81 V HI Page 4 of 7 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 57 100% to Share Summary statement of financial positions GHSm GHSm GHSm 2017 2018 2019 Non-Current Assets 7.2 8.31 8.64 Current assets Inventory: Raw materials 0.27 0.36 0.45 V Finished goods 1.20 1.29 1.35 Receivables 3.42 3.96 5.52 HI Bank 0.09 0.12 0.15 4.98 5.76 7.47 o Less Current liabilities 4.05 4.68 5.7 Net current assets 0.93 1.05 1.77 8.13 9.36 10.41 1:42 AM Saturday 23-May-20 Capital and reserves 1.5 2.73 4.8 Bank loans 6.63 6.63 6.63 1 26 1041 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 5 / 7 100% DE L/ to Share Capital and reserves 1.5 2.73 4.8 Bank loans 6.63 6.63 6.63 8.13 9.36 10.41 Ghana Printers Association Average ratios for Association members 2019 % Return on capital employed 26.0% Asset turnover 1.79 times V Net profit margin 14.5% HI Current ratio 1.5:1 Acid test ratio 1.03:1 83 days Debtors collection period Gearing ratio Labour cost % of sales 32.0% 18.1% Operating cost % of sales 85.5% au Distribution costs % of sales 9.5% 1:42 AM Saturday 23-May-20 Page 5 of 7 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 6 / 7 O 100% DE to Share Admin costs % of sales 4.5% Required: In your role of Planning Assistant, you are to prepare an analysis of the company's figures over the three-year period using the performance criteria listed in the inter-firm comparison table. a) Calculate all the ratios given in the average ratios for Association members for 2017, 2018 and 2019. (6 Marks) b) Prepare a detailed report on the company's performance in terms of profitability and liquidity compared with the average of the sector over the period. (14 Marks) V (Total 20 Marks) HI QUESTION 3 N a) On 1 January 2017, Gyamera Limited granted 100 share options to each of its 300 employees, with each of the share options being conditional upon the employee working for Gyamera Limited until 31 December 2019. At the grant date, the FV of each share option was GHC15.00. During 2017, 15 employees left Gyamera Limited and the company's directors estimated that a total of 20% of the 300 employees would leave during the three-year period 2017-2019. At the beginning of 2018, Gyamera Limited modified the terms and conditions of the share option by reducing the exercise price. This had the effect of increasing the FV of a share option at the beginning of 2018 by GHC9.00. 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 100% to Share 6 17 ma During 2018, a further six employees left the company and the directors revised their estimate of the total number of the 300 employees to 15% that would leave the company during the three-year period 2017-2019. During 2019, a further five employees left the company. Required; Calculate the remuneration expense that should be recognised in Gyamera Limited's financial statements in respect of the share-based payment agreement for each of the three years 2017,2018 and 2019. (6 Marks) V HI b) IAS 32 makes it clear that the following items are not financial instruments. i. Physical assets, eg inventories, property, plant and equipment, leased assets and intangible assets (patents, trademarks etc) Page 6 of 7 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf Sign In A 1 7 / 7 100% to Share 11 Prepaid expenses, deferred revenue and most warranty obligations Liabilities or assets that are not contractual in nature (Deferred revenue, warranty obligations 111. Required Write a Memo to your CEO, Mr Francis Tagoe explaining with reasons why the items listed above do not qualify as financial instruments. (6 Marks) V c) Your managing director, Mr Nicholas Adoboe-Mensah is not convinced why your company should give something back to the society, Explain with examples to him in a form of a memo the links between corporate performance, and corporate social responsibility. (5 Marks) HI d) Global Reporting Initiatives structures key performance indicators according to a hierarchy category, aspect and indicator. Indicators are grouped in terms of the three dimensions of the conventional definition of sustainability - economic, environment, and social. Required 1:42 AM Saturday 23-May-20 Write a memo to your Chief Executive officer Mr Baba Ahmed explaining to him the meaning of Global Reporting Initiatives and state two examples each of the aspect of each of the dimensions. (3 Marks) (Total 20 Marks) 1 I O A wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In 2 2 / 7 100% je to Share Zoom out (Ctrl+Minus) QUESTION 1 Below are the statements of financial position of three companies as at 31 December 2017. Bauble Jewel Gem Co Co GHS'000 GHS'000 GHS'000 V Non-current assets 60 75 HI Property, plant and equipment Investments in group companies 100 720 185 905 175 160 75 Current assets 90 85 1,080 250 160 Equity Share capital - GHC1 ordinary shares Retained earnings 400 560 960 100 90 50 70 115 40 190 Current liabilities 60 1:41 AM Saturday 23-May-20 120 1,080 250 160 You are also given the following information: 1 wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help | O JI Home Tools wendy.pdf X Sign In A 3/7 100% to Share vii. In addition, on 28 December 2017, Gem processed the sale of GHS1,500 of goods to Bauble, which Bauble did not account for until their receipt on 2nd January 2018. The in-transit reconciliation should be achieved by assuming the transaction had been recorded in the books of Bauble before the year end. At 31st December 2017, Gem had a trade receivable balance in the current assets of GHS2,000 due from Bauble which differed to the equivalent balance in Bauble's books due to the sale made on 28 December 2017. viii. It is the group's policy to value the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary's identifiable net assets. Required V Prepare the consolidated statement of financial position for Bauble Co and its subsidiaries as at 31st December 2017. (20 Marks) HI 2 QUESTION 2 Issah Mohammed is the director of FTG Printing Ltd. The Company that has traded 20 years in Ghana and had achieved very good levels of growth and return on capital in the past, is now changing. In recent time it has failed to introduce new product lines, relying on traditional products and little has been invested in Research or Product Development. 1:41 AM Saturday 23-May-20 You are a business planning consultant for a firm of Management Consultants. FTG Printing Ltd is one of your clients. In recent times the business has experienced increased turnover but a downturn in overall performance. 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf Sign In A 317 100% to Share Issah Mohammed who is the director of FTG Printing has had a meeting with your Director and he has stated that he wants to introduce tighter management control within the company by introducing a system of responsibility accounting You receive the following memo from your Director, Rash Rooney, regarding this case. Memorandum To: Business Planning Assistant V Date:18th May, 2020. HI From: Rash Rooney, Director Subject: FTG Printing accounts information. You are aware that I met with Issah Mohammed yesterday and that he is concerned with the latest results shown in the final accounts that have recently been prepared at year end. Page 3 of 7 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf Sign In A 4 / 7 100% DO to Share The file attached contains a summary of the company's abbreviated income statements and statement of financial positions for the past three years, together with additional information and performance indicators for their business sector for the period under review. Examine this information and present of a detailed financial analysis of the company over the three-year period. Signed: Rash Rooney V Financial information on FTG Printing Ltd. HI Summary income statements GHSm GHSm GHSm 2017 2018 2019 Sales turnover 14.70 15.90 19.80 12.51 13.29 17.46 Operating costs Operating profit before tax 2.19 2.61 2.34 Taxation 0.72 0.90 0.81 1:42 AM Saturday 23-May-20 Profit after tax 1.47 1.71 1.53 Dividends 0.36 0.48 0.48 1 Retained profit 1.11 1.23 1.05 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 4 / 7 O 100% to Share N.B. The firm's detailed breakdown of costs in GHSm is as follows: Years 2017 2018 2019 Labour costs 2.79 2.94 3.75 Distribution costs 1.32 1.47 1.83 Administration costs 0.57 0.66 0.81 V HI Page 4 of 7 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 57 100% to Share Summary statement of financial positions GHSm GHSm GHSm 2017 2018 2019 Non-Current Assets 7.2 8.31 8.64 Current assets Inventory: Raw materials 0.27 0.36 0.45 V Finished goods 1.20 1.29 1.35 Receivables 3.42 3.96 5.52 HI Bank 0.09 0.12 0.15 4.98 5.76 7.47 o Less Current liabilities 4.05 4.68 5.7 Net current assets 0.93 1.05 1.77 8.13 9.36 10.41 1:42 AM Saturday 23-May-20 Capital and reserves 1.5 2.73 4.8 Bank loans 6.63 6.63 6.63 1 26 1041 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 5 / 7 100% DE L/ to Share Capital and reserves 1.5 2.73 4.8 Bank loans 6.63 6.63 6.63 8.13 9.36 10.41 Ghana Printers Association Average ratios for Association members 2019 % Return on capital employed 26.0% Asset turnover 1.79 times V Net profit margin 14.5% HI Current ratio 1.5:1 Acid test ratio 1.03:1 83 days Debtors collection period Gearing ratio Labour cost % of sales 32.0% 18.1% Operating cost % of sales 85.5% au Distribution costs % of sales 9.5% 1:42 AM Saturday 23-May-20 Page 5 of 7 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 6 / 7 O 100% DE to Share Admin costs % of sales 4.5% Required: In your role of Planning Assistant, you are to prepare an analysis of the company's figures over the three-year period using the performance criteria listed in the inter-firm comparison table. a) Calculate all the ratios given in the average ratios for Association members for 2017, 2018 and 2019. (6 Marks) b) Prepare a detailed report on the company's performance in terms of profitability and liquidity compared with the average of the sector over the period. (14 Marks) V (Total 20 Marks) HI QUESTION 3 N a) On 1 January 2017, Gyamera Limited granted 100 share options to each of its 300 employees, with each of the share options being conditional upon the employee working for Gyamera Limited until 31 December 2019. At the grant date, the FV of each share option was GHC15.00. During 2017, 15 employees left Gyamera Limited and the company's directors estimated that a total of 20% of the 300 employees would leave during the three-year period 2017-2019. At the beginning of 2018, Gyamera Limited modified the terms and conditions of the share option by reducing the exercise price. This had the effect of increasing the FV of a share option at the beginning of 2018 by GHC9.00. 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf X Sign In A 100% to Share 6 17 ma During 2018, a further six employees left the company and the directors revised their estimate of the total number of the 300 employees to 15% that would leave the company during the three-year period 2017-2019. During 2019, a further five employees left the company. Required; Calculate the remuneration expense that should be recognised in Gyamera Limited's financial statements in respect of the share-based payment agreement for each of the three years 2017,2018 and 2019. (6 Marks) V HI b) IAS 32 makes it clear that the following items are not financial instruments. i. Physical assets, eg inventories, property, plant and equipment, leased assets and intangible assets (patents, trademarks etc) Page 6 of 7 1:42 AM Saturday 23-May-20 1 | O JI wendy.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools wendy.pdf Sign In A 1 7 / 7 100% to Share 11 Prepaid expenses, deferred revenue and most warranty obligations Liabilities or assets that are not contractual in nature (Deferred revenue, warranty obligations 111. Required Write a Memo to your CEO, Mr Francis Tagoe explaining with reasons why the items listed above do not qualify as financial instruments. (6 Marks) V c) Your managing director, Mr Nicholas Adoboe-Mensah is not convinced why your company should give something back to the society, Explain with examples to him in a form of a memo the links between corporate performance, and corporate social responsibility. (5 Marks) HI d) Global Reporting Initiatives structures key performance indicators according to a hierarchy category, aspect and indicator. Indicators are grouped in terms of the three dimensions of the conventional definition of sustainability - economic, environment, and social. Required 1:42 AM Saturday 23-May-20 Write a memo to your Chief Executive officer Mr Baba Ahmed explaining to him the meaning of Global Reporting Initiatives and state two examples each of the aspect of each of the dimensions. (3 Marks) (Total 20 Marks) 1