INFORMATION

Ontdekking Ondernemings is a leading manufacturer of domestic appliances, catering primarily to the Southern African market. Presently, the company is embarking on an expansion journey into the African Continental Free Trade Area $($AfCFTA$).$ The Chairman of the Board of Directors is pleased with the company's performance for the fiscal year ending $31$ December $2023,$ noting consistent improvement over recent years.

However, amidst this progress, the Finance Director expresses concern regarding shareholders' satisfaction with the company$$s performance in comparison to industry peers. Despite the company's enhanced performance, there's a worry that it might not meet the expectations set by competitors within the same sector. It is noteworthy that the sector$\text{'}$s average return on equity $($ROE$)$ for the year ending $31$ December $2023$ stands at $12\mathrm{.}5\%,$ setting a benchmark against which Ontdekking Ondernemings' performance is evaluated.

The excerpts of financial statements of Ontdekking Ondernemings are as follow:

Ontdekking Ondernemings

Statement of Profit or Loss for the year ended $31$ December $2023$

$20232022$

R R

Revenue $125000000119500000$

Cost of sales $(103600000)(101575000)$

Gross profit $2140000017925000$

Operating costs $(11600000)(11233000)$

Finance costs $(3600000)(3600000)$

Profit before tax $62000003092000$

Corporate tax $(1736000)865760$

Profit for the year $44640002226240$

Ontdekking Ondernemings

Statement of Financial Position as at $31$ December $2023$

$20232022$

R R

Assets

Non$-$current assets

Property $16200000)16200000)$

Owned plant $2520000025200000$

Leased plant $2440000020500000$

$6580000061900000$

Current assets $3280000028000000$

Total asset $9860000089900000$

Equity and Liabilities

Equity

Shareholders$$ equity shares of R$1$ each $1800000018000000$

Property revaluation surplus $80000002000000$

Retained earnings $2120000020000000$

$4720000040000000$

Non$-$current liabilities

$10\%$ loan notes $2000000016600000$

Finance lease obligations $1280000012800000$

$3280000029400000$

Current liabilities

Finance lease obligations $42000004200000$

Other current liabilities $1440000016300000$

$1860000020500000$

Total equity and Liabilities $9860000089900000$

REQUIRED:

$2\mathrm{.}1.$ Calculate Return on Equity of Ontdekking Ondernemings for $2022$ and $2023.$ Comment on the results obtained. $(4)$

$2\mathrm{.}2.$ Using the DuPont model, analyse and comment on the impact of Ontdekking Ondernemings$$s operational efficiency, asset utilisation, and financial leverage on the return on shareholders$$ equity for the year ended $31$ December $2023($round off each part of the analysis to four decimal places$).$ It is important that you indicate whether the business has become more efficient and$/$or riskier over the $2023$ financial year and make actionable recommendations to the management of Ontdekking Ondernemings in terms of improving the return on equity going forward. $(8)$