The followings are the financial statements (statement of financial position and consolidated income statement) for Aeon Stores (Hong Kong) Co., Limited1 and Lifestyle International Holdings Limited2 .

(a) Perform vertical analysis for the two companies for the years of 2019 and 2020. (12 marks)

(b) Perform ratio analysis for the two companies for the year ended 31 December 2020. The scope of analysis should include liquidity, profitability, and solvency. Please show the workings of the accounting ratios. (14 marks)

(c) Recommend with reasons which company is considered to have better financial performance. (14 marks)

COMPANY 1:

COMPANY 2:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES 2020 HK$'000 2019 HK$'000 5 7 8 Revenue Other income Investment income Interest income from rental deposits Purchases of goods and changes in inventories Staff costs Depreciation of investment properties Depreciation of property, plant and equipment Depreciation of right-of-use assets Lease expenses Other expenses Pre-operating expenses Other gains and losses Interest on lease liabilities 21 18 19 9,961,893 583,928 22,411 10,767 (7,082,877) (1,061,224) (83,913) (204,694) (724,225) (91,275) (1,040,881) (2,823) (14,581) (292,755) 9,493,774 545,918 27.430 10,316 (6,656,159) (1,077,474) (85,247) (209,769) (749,094) (84,831) (1,063,992) (2,694) (12,719) (303,414) 9 10 11 Loss before tax Income tax expense (20,249) (9,987) (167,955) (21,032) 12 Loss for the year 13 (30,236) (188,987) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 NOTES 2020 HK$'000 2019 HK$'000 Non-current Assets Property, plant and equipment Right-of-use assets Investment properties Goodwill Equity Instruments at FVTOCI Pledged bank deposits Deferred tax assets Rental and related deposits paid 18 19 21 22 23 24 25 26 645,756 3,762,037 479,890 62,838 19,848 22,417 44,819 201,724 679.741 3,902,352 488,352 94,838 23,598 21,305 46,944 184,349 5,239,329 5,441,479 27 26 Current Assets Inventories Trade receivables Other receivables, prepayments and deposits Amounts due from fellow subsidiaries Tax recoverable Time deposits Pledged bank deposits Bank balances and cash 889,997 37,809 102,112 62,690 26 28 935,949 35,316 83,346 63,995 8,532 327,567 10,751 1.470,515 29 24 30 463,740 10,230 1,537,837 3,104,415 2,936,971 Current Liabilities Trade payables Other payables, accrued charges and other liabilities Lease liabilities Contract liabilities Dividend payable Amount due to ultimate holding company Amounts due to fellow subsidiaries Tax liabilities 31 31 32 31 1,231,199 753,530 711,073 441,548 295 26,998 28,933 5,150 1,250,087 729,068 762,137 409,426 354 28,665 100,979 16,859 33 33 3,198,726 3,297,575 Net Current Liabilities (94,311) (361,604) Total Assets Less Current Liabilities 5,145,018 5,079,875 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 NOTES 2020 HK$'000 2019 HK$'000 Capital and Reserves Share capital Reserves 31 115,158 587,498 115,158 658,374 Equity attributable to owners of the Company Non-controlling interest 702,656 146,976 773,532 132,752 Total Equity 849,632 906,284 Non-current Liabilities Rental deposits received and other liabilities Lease labilities Deferred tax liabilities 31 32 25 135,579 4,159,573 234 133,916 4,038,563 1,112 4,295,386 4,173,591 5,145,018 5,079,875 Lifestyle International Holdings Limited: Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2020 R2_4284+==+-ES Note 4 2020 HK$'000 1,993,024 (519,387) 1,473,637 218,878 (578,107) (114,634) 2019 HK$'000 3,542,032 (888,869) 2,653,163 147,165 (697,314) (137,787) , () 6 Revenue Cost of sales Gross profit Other income, gains and losses Selling and distribution costs Administrative expenses Interest income and investment gains/(losses) Fair value changes on investment properties Finance costs Profit before taxation Taxation Profit for the year 7 34,559 740,176 14 8 10 9 (418,056) (369,314) 246,963 (108,453) 138,510 (173,959) (365,238) 2166,176 (275,500) 1,890,676 at 31 December 31 December 2020 HKS'000 31 December 2019 HK5000 Note 14 15 8,068,559 6,541,161 Non-current assets Investment properties Property, plant and equipment Financial assets at fair value through other comprehensive incomo Financial assets at fair value through profit or loss Deposits Deferred tax assets 5,420,000 6,291,532 633,121 18 1,320,281 19 15,871 72,248 25 16,538 82,839 2.451 16,116,829 12.4V2 16 17 25,795 644,878 Current assets Inventories Trade and other recolvables Financial assets at fair value through profit or loss Bank deposits Cash and cash equivalents 38,615 102.811 4,814,485 19 20 20 4,175,789 9,660,947 3,306,082 1,508,698 7,112,561 12,068,767 Current liabilities Trade and other payables Contract liabilities Lease liabilities Tax payable Bank borrowings --- due within one year Financial liabilities at fair value through profit or loss 21 22 15 662,249 121,824 86,574 105,162 826,275 138.294 76,144 490.926 23 9,628,937 4,070,966 19 12 220,836 10,825,582 5,602,617 Non-current liabilities Bank borrowings - due after one year Bonds-due after one year Lease liabilities Deferred tax liabilities - 23 24 15 25 3,874,125 6,836,181 136,697 260,067 11, 107,070 3,845,124 7,641,212 6,962,233 210,876 243 297 15,057,618 3,841,304 Consolidated Statement of Financial Position continued) SARE 31 December 700 31 December 2020 HKS'O00 31 December 2019 HKS000 Note 26 Capital and reserves Share capital Reserves Equity attributable to owners of the Company 7,510 3,837,614 7,510 3,833,794 3,845,124 3,841,304 CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES 2020 HK$'000 2019 HK$'000 5 7 8 Revenue Other income Investment income Interest income from rental deposits Purchases of goods and changes in inventories Staff costs Depreciation of investment properties Depreciation of property, plant and equipment Depreciation of right-of-use assets Lease expenses Other expenses Pre-operating expenses Other gains and losses Interest on lease liabilities 21 18 19 9,961,893 583,928 22,411 10,767 (7,082,877) (1,061,224) (83,913) (204,694) (724,225) (91,275) (1,040,881) (2,823) (14,581) (292,755) 9,493,774 545,918 27.430 10,316 (6,656,159) (1,077,474) (85,247) (209,769) (749,094) (84,831) (1,063,992) (2,694) (12,719) (303,414) 9 10 11 Loss before tax Income tax expense (20,249) (9,987) (167,955) (21,032) 12 Loss for the year 13 (30,236) (188,987) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 NOTES 2020 HK$'000 2019 HK$'000 Non-current Assets Property, plant and equipment Right-of-use assets Investment properties Goodwill Equity Instruments at FVTOCI Pledged bank deposits Deferred tax assets Rental and related deposits paid 18 19 21 22 23 24 25 26 645,756 3,762,037 479,890 62,838 19,848 22,417 44,819 201,724 679.741 3,902,352 488,352 94,838 23,598 21,305 46,944 184,349 5,239,329 5,441,479 27 26 Current Assets Inventories Trade receivables Other receivables, prepayments and deposits Amounts due from fellow subsidiaries Tax recoverable Time deposits Pledged bank deposits Bank balances and cash 889,997 37,809 102,112 62,690 26 28 935,949 35,316 83,346 63,995 8,532 327,567 10,751 1.470,515 29 24 30 463,740 10,230 1,537,837 3,104,415 2,936,971 Current Liabilities Trade payables Other payables, accrued charges and other liabilities Lease liabilities Contract liabilities Dividend payable Amount due to ultimate holding company Amounts due to fellow subsidiaries Tax liabilities 31 31 32 31 1,231,199 753,530 711,073 441,548 295 26,998 28,933 5,150 1,250,087 729,068 762,137 409,426 354 28,665 100,979 16,859 33 33 3,198,726 3,297,575 Net Current Liabilities (94,311) (361,604) Total Assets Less Current Liabilities 5,145,018 5,079,875 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 NOTES 2020 HK$'000 2019 HK$'000 Capital and Reserves Share capital Reserves 31 115,158 587,498 115,158 658,374 Equity attributable to owners of the Company Non-controlling interest 702,656 146,976 773,532 132,752 Total Equity 849,632 906,284 Non-current Liabilities Rental deposits received and other liabilities Lease labilities Deferred tax liabilities 31 32 25 135,579 4,159,573 234 133,916 4,038,563 1,112 4,295,386 4,173,591 5,145,018 5,079,875 Lifestyle International Holdings Limited: Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2020 R2_4284+==+-ES Note 4 2020 HK$'000 1,993,024 (519,387) 1,473,637 218,878 (578,107) (114,634) 2019 HK$'000 3,542,032 (888,869) 2,653,163 147,165 (697,314) (137,787) , () 6 Revenue Cost of sales Gross profit Other income, gains and losses Selling and distribution costs Administrative expenses Interest income and investment gains/(losses) Fair value changes on investment properties Finance costs Profit before taxation Taxation Profit for the year 7 34,559 740,176 14 8 10 9 (418,056) (369,314) 246,963 (108,453) 138,510 (173,959) (365,238) 2166,176 (275,500) 1,890,676 at 31 December 31 December 2020 HKS'000 31 December 2019 HK5000 Note 14 15 8,068,559 6,541,161 Non-current assets Investment properties Property, plant and equipment Financial assets at fair value through other comprehensive incomo Financial assets at fair value through profit or loss Deposits Deferred tax assets 5,420,000 6,291,532 633,121 18 1,320,281 19 15,871 72,248 25 16,538 82,839 2.451 16,116,829 12.4V2 16 17 25,795 644,878 Current assets Inventories Trade and other recolvables Financial assets at fair value through profit or loss Bank deposits Cash and cash equivalents 38,615 102.811 4,814,485 19 20 20 4,175,789 9,660,947 3,306,082 1,508,698 7,112,561 12,068,767 Current liabilities Trade and other payables Contract liabilities Lease liabilities Tax payable Bank borrowings --- due within one year Financial liabilities at fair value through profit or loss 21 22 15 662,249 121,824 86,574 105,162 826,275 138.294 76,144 490.926 23 9,628,937 4,070,966 19 12 220,836 10,825,582 5,602,617 Non-current liabilities Bank borrowings - due after one year Bonds-due after one year Lease liabilities Deferred tax liabilities - 23 24 15 25 3,874,125 6,836,181 136,697 260,067 11, 107,070 3,845,124 7,641,212 6,962,233 210,876 243 297 15,057,618 3,841,304 Consolidated Statement of Financial Position continued) SARE 31 December 700 31 December 2020 HKS'O00 31 December 2019 HKS000 Note 26 Capital and reserves Share capital Reserves Equity attributable to owners of the Company 7,510 3,837,614 7,510 3,833,794 3,845,124 3,841,304