solar power and QUESTION 2 20 Marks (36 minutes) Ethica Ltd is a pharmaceutical research and development company that aims to bring innovative new drugs to the market on an international basis. Founded in 1999 it initially its development capabilities. It is now beginning preparations for commercial manufacturing and marketing having completed a rights issue in June 2010 to raise the funds needed. foundation of their production process. Their research and development has yielded one commercial product, which currently has no market competition. Petrochem Ltd is a leading international company in the oil, gas, petrochemicals industry which was conceptualised in the 1960's and started operations in 1970. The company is listed on both the Johannesburg and New York Security Exchanges. Its main business activities are in exploration and production (17%), refining and marketing (76%) and chemicals (7%). This year it reported the fifth consecutive year of increased profits before exceptional items. Its focus for the future is on a performance enhancement programme aimed at increasing volumes and achieving cost efficiencies against a background of increasing prices. Petrochem Ltd has over the last five years concluded several joint venture projects with partners around the globe to develop identified projects in those countries by using Petrochem's know how. They disclose their production capacities, utilisation and contractual agreements fully. Forecasts for the near future have in the past turned out to be very reliable and analysts place great store on it. Financial information for the year ended Petrochem Ethica Ltd 30 September 2010 Ltd Return on sales (NPAT/ Sales) % 5,7% (287)% Research and development/Sales % 0,3% 360% Asset turnover (Sales / Total assets) 1,32 0,5 Asset leverage (Total assets / Equity) 2,33 1,06 Return on equity (NPAT/Equity) % 7,6% (14,42)% Interest expense / Average debt % 12,6% Current ratio 20,0 Total debt (ST+LT)/(Total debt + Equity) 0,24 0,02 Cash &marketable securities / Current assets % 10,7% 98,2% Operating free cash flow (R'000) RS 001 000 R(37 468) Earnings per share (cent) 433c (4,5) Dividend per share (cent) 110c 0 Market capitalisation (R millions) R45 616 R79,5 REQUIRED Marks (a) Using the information above, analyze the financial performance of the two companies to explain to what extent the financial information 10 reflects the different activities of the two industries. (b) Responsibility accounting is used to manage the performance of responsibility centres, identify the types of responsibility centres used 10 and discuss how the performance of each responsibility may be measured. TOTAL MARKS 20 Page 3 of