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School of Law & Finance SHRO36-6 ACCOUNTING FOR LEADERS (OMAN) CLASS TEST SAMPLE 1 Date : Start Time : TBC Time Allowed: One hour Unit Co-ordinator: Larry Teh Total: 25 marks. INSTRUCTIONS TO CANDIDATES You must attempt Question 1, which is COMPULSORY This is an closed book examination and no written materials (including dictionaries, e-dictionaries and e-readers) is permitted; Only simple electronic calculators may be used (you may NOT use any electronic devices, including mobile phones, capable of holding text). PLEASE DO NOT OPEN THIS PAPER UNTIL INSTRUCTED TO DO SO BY THE SENIOR INVIGILATOR AND DO NOT REMOVE THIS PAPER FROM THE EXAMINATION HALL ABC LLC is considering purchasing an interest in its competitor XYZ LLC. The managing director of ABC has obtained some financial information relating to XYZ, as shown below: 2015 2014 ROCE 25.4% 18.6% ROSF 11.4% 12.5% Gross profit margin 35% 28.9% Operating profit margin 13.1% 10% Trade receivables settlement period 25 days 25 days Trade payables settlement period 60 days 47 days Stock days 55 days 60 days Current ratio 1.9 1.5 Quick ratio 1.0 0.70 Gearing 30.1% 39.4% Additional information:Purchases and sales are made evenly throughout the year. All purchases and sales are made on credit terms. Sales revenue has increased by a third during the year. There is no inflation. The company sells only one product. The non-current assets have increased by 20% during the year, due to investment. Required As a Management Consultant, you are required to produce a report for the Board of Directors of ABC, which covers, inter alia, the following:1. Analysis and interpretation of the above information; 2. An assessment of the strengths and weaknesses of your analysis; 3. Any area that require further investigation; 4. Any other information that you would like to have; 5. Limitations of your analysis and interpretation; 6. A clear recommendation as to whether ABC should purchase an interest in its competitor, XYZ. (25 marks)