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49 27 Section A - Answer all questions (100 marks) Question 1 Rampage ple is looking for long-term funding and has submitted an application to a bank requesting a loan of $50 million. You work for the bank and have been asked to perform a review on the financial statements of Rampage ple. You have also been asked to provide an initial recommendation as to whether or not this application should proceed further. The statement of financial position as at 30 June 2019 and its comparative is shown below: 2019 2018 $m $m ASSETS Non-current assets: Property, plant and equipment (PPE) 96 83 Investment in associate 27 Available for sale investment 30 25 153 108 Current assets: Inventories 29 13 Receivables Cash and cash equivalents 5 Total assets 231 153 EQUITY AND LIABILITIES Equity: Share capital ($1 shares) 15 15 Share premium 5 5 Revaluation Reserve 10 Other reserves 12 Retained earnings 80 Total equity 122 96 Non-current liabilities Long-term borrowings 70 40 Deferred tax 6 2 76 Current liabilities Trade and other payables 20 15 Short-term borrowings (overdraft) 13 33 Total liabilities 109 Total equity and liabilities 231 153 8 68 42 2 The statement of comprehensive income for the year ended 30 June 2019 is shown below together with its comparative: 2019 2018 $m Sm Revenue 290 201 Cost of sales (210) Gross profit 80 60 Administrative expenses (16) (14) Distribution costs (32) (18) Finance costs (7) Share of profit of associate Profit before tax Income tax expense Profit for the year Other comprehensive income: Revaluation gain on Property, plant and Equipment 13 Gains on Available for sale investment 5 Tax effects of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year wn Bu g 8 E ga In addition to obtaining extracts from the financial statements provided below, you have highlighted a section of the annual report where the newly appointed Chief Executive Officer of Rampage ple made the following comment: "We commenced the planned expansion in the second quarter of the financial period with much success, Revenue has increased 44% in the last 12 months and profitability continues to improve with post-tax profits of $17 million in this year. During the year we acquired a strategic 35% investment in AB, our main supplier and now have representation on its board. We have also invested in other non-current assets and this will ensure the expansion continues as planned." Required: (a) Analyse the financial performance and financial position of Rampage ple and makes a recommendation, based on your analysis, as to whether the application should proceed further. (10 marks are available for the calculation of relevant ratios.) (26 marks) (b) Explain briefly the potential limitations of performing analysis while relying on: ().the financial information of Rampage ple from one year to another, and (7 marks) (i) the narrative information of Rampage ple provided in the annual report. (7 marks) Total: 40 marks 3 49 27 Section A - Answer all questions (100 marks) Question 1 Rampage ple is looking for long-term funding and has submitted an application to a bank requesting a loan of $50 million. You work for the bank and have been asked to perform a review on the financial statements of Rampage ple. You have also been asked to provide an initial recommendation as to whether or not this application should proceed further. The statement of financial position as at 30 June 2019 and its comparative is shown below: 2019 2018 $m $m ASSETS Non-current assets: Property, plant and equipment (PPE) 96 83 Investment in associate 27 Available for sale investment 30 25 153 108 Current assets: Inventories 29 13 Receivables Cash and cash equivalents 5 Total assets 231 153 EQUITY AND LIABILITIES Equity: Share capital ($1 shares) 15 15 Share premium 5 5 Revaluation Reserve 10 Other reserves 12 Retained earnings 80 Total equity 122 96 Non-current liabilities Long-term borrowings 70 40 Deferred tax 6 2 76 Current liabilities Trade and other payables 20 15 Short-term borrowings (overdraft) 13 33 Total liabilities 109 Total equity and liabilities 231 153 8 68 42 2 The statement of comprehensive income for the year ended 30 June 2019 is shown below together with its comparative: 2019 2018 $m Sm Revenue 290 201 Cost of sales (210) Gross profit 80 60 Administrative expenses (16) (14) Distribution costs (32) (18) Finance costs (7) Share of profit of associate Profit before tax Income tax expense Profit for the year Other comprehensive income: Revaluation gain on Property, plant and Equipment 13 Gains on Available for sale investment 5 Tax effects of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year wn Bu g 8 E ga In addition to obtaining extracts from the financial statements provided below, you have highlighted a section of the annual report where the newly appointed Chief Executive Officer of Rampage ple made the following comment: "We commenced the planned expansion in the second quarter of the financial period with much success, Revenue has increased 44% in the last 12 months and profitability continues to improve with post-tax profits of $17 million in this year. During the year we acquired a strategic 35% investment in AB, our main supplier and now have representation on its board. We have also invested in other non-current assets and this will ensure the expansion continues as planned." Required: (a) Analyse the financial performance and financial position of Rampage ple and makes a recommendation, based on your analysis, as to whether the application should proceed further. (10 marks are available for the calculation of relevant ratios.) (26 marks) (b) Explain briefly the potential limitations of performing analysis while relying on: ().the financial information of Rampage ple from one year to another, and (7 marks) (i) the narrative information of Rampage ple provided in the annual report. (7 marks) Total: 40 marks 3