Questiion $5$ : Du pont analysis

You have been employed as a financial analyst of Roswika $($Pty$),$ a private company recently purchased by the government $.$ Your immediate task is to assess the financial performance and health of the newly acquired company $.$ The return on equity appears to be on a downward trend $,$ although there was a spike in March $2022.$

$202120222023$

ROE $5\mathrm{.}90\%8\mathrm{.}31\%3\mathrm{.}15\%$

The extracts of the financial statements of Roswika $($Pty$)($Ltd$),$ for the year ended $31$ December $2023$ for your assessment are below$$

$202120222023$

R R R

Sales $775075083509508770500$

Cost of Sales $545075058505006455000$

Gross Profit $230000025004502315500$

Expenses $187500019807502050950$

Earnings before interest and tax $425000539700264550$

Interest $165000152500137500$

Profit before tax $26000087200127050$

Tax $7020010454434303\mathrm{.}50$

Profit after tax $18980028265692746\mathrm{.}50$

Number of ordinary shares $100000010000001000000$

Earnings per share $($R$0\mathrm{.}00)0\mathrm{.}190\mathrm{.}280\mathrm{.}09$

Diidends $100000100000100000$

Statement of financial Position

$202120222023$

R R R

Non$-$ current assets $485325051632505091000$

Property, $,$ Plant and Equipment $345075036507503557750$

Motor vehicles $132500014350001455750$

Investment in SAC Ltd $775007750077500$

Current Assets $345750032602502993250$

Inventory $775000700750685000$

Trade Receivables $124500013250001457500$

Cash and Cash equivalents $14375001234500850750$

Total assets $831075084235008084250$

Equity and Liabilities

Equity $321725033999063392652$

Ordinary shares $100000010000001000000$

Retained Income $221725023999062392652$

Non$-$ Current Liablities $385000038800003334000$

Long$-$term loan $325000033400002854000$

Bonds $600000540000480000$

Current liabilities $124350011435941357597$

Trade creditors $124350011435941357597$

Total equity and liabilities $831075084235008084250$

Required:

$5\mathrm{.}1.$ Decompose return on Equity using the Du Pont traditional approach $,$ identify and comment on the reasons for the fluctuation in return on equity $.$ Analyse the performance to gross profit and expenses to sales level.

$($a$)$ Calculations $(10)$

$($b$)$ Interpretation and conclusion $(10)$