QUESTION SIX RST Co is considering purchasing an interest in its competitor XYZ Co. The managing director of RST Co has obtained the three most recent statements of comprehensive income and statements of financial position of XYZ Co as shown below. XYZ CO STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR YEARS ENDED 31 DECEMBER 2016 2017 2018 GHS'000 GHS'000 GHS'000 18,000 18,900 Revenue Cost of sales 19,845 10,440 10,340 11,890 Gross profit 7,560 8,560 7,955 Distribution costs 1,565 1,670 1,405 Administrative expenses Operating profit 1,409 1.503 1,591 4,586 5,387 4,959 104 215 450 Interest payable on bank overdraft Interest payable on 12% debentures 600 600 600 Profit before taxation 3,882 4,572 3,909 Income tax 1,380 2,000 1,838 Profit after taxation 2,502 2,572 2,071 Assets Non current assets Land and buildings Plant and machinery Current assets Inventory Trade receivables Cash Equity and liabilities Equity 8,000 Share capital Retained earnings 8,000 7,313 6,434 15,313 15,584 Non-current liabilities 12% debentures 20Y1-20Y4 5,000 5,000 Current liabilities Trade payables 390 388 Bank 1,300 2,300 Taxation 897 1,420 Dividend payable 1,600 1,696 5,804 6,841 23,621 26,117 27,425 Required Prepare a report for the managing director of RST Co commenting on the financial position of XYZ Co and highlighting any areas that require further investigation. (Marks will be awarded for ratios and other financial statistics where appropriate.) 11,460 8,896 1,775 1,440 50 2016 GHS'000 20,356 3,265 23,621 14,434 5,000 4,187 12,121 9,020 2,663 2,260 53 2017 GHS000 21,141 4,976 26,117 11,081 9,130 3,995 3,164 55 8,000 7,584 446 3,400 1,195 1,800 2018 GHS000 20,211 7,214 27,425 QUESTION SIX RST Co is considering purchasing an interest in its competitor XYZ Co. The managing director of RST Co has obtained the three most recent statements of comprehensive income and statements of financial position of XYZ Co as shown below. XYZ CO STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR YEARS ENDED 31 DECEMBER 2016 2017 2018 GHS'000 GHS'000 GHS'000 18,000 18,900 Revenue Cost of sales 19,845 10,440 10,340 11,890 Gross profit 7,560 8,560 7,955 Distribution costs 1,565 1,670 1,405 Administrative expenses Operating profit 1,409 1.503 1,591 4,586 5,387 4,959 104 215 450 Interest payable on bank overdraft Interest payable on 12% debentures 600 600 600 Profit before taxation 3,882 4,572 3,909 Income tax 1,380 2,000 1,838 Profit after taxation 2,502 2,572 2,071 Assets Non current assets Land and buildings Plant and machinery Current assets Inventory Trade receivables Cash Equity and liabilities Equity 8,000 Share capital Retained earnings 8,000 7,313 6,434 15,313 15,584 Non-current liabilities 12% debentures 20Y1-20Y4 5,000 5,000 Current liabilities Trade payables 390 388 Bank 1,300 2,300 Taxation 897 1,420 Dividend payable 1,600 1,696 5,804 6,841 23,621 26,117 27,425 Required Prepare a report for the managing director of RST Co commenting on the financial position of XYZ Co and highlighting any areas that require further investigation. (Marks will be awarded for ratios and other financial statistics where appropriate.) 11,460 8,896 1,775 1,440 50 2016 GHS'000 20,356 3,265 23,621 14,434 5,000 4,187 12,121 9,020 2,663 2,260 53 2017 GHS000 21,141 4,976 26,117 11,081 9,130 3,995 3,164 55 8,000 7,584 446 3,400 1,195 1,800 2018 GHS000 20,211 7,214 27,425