This is a part (a) of the question 2

QUESTION 2 Issah Mohammed is the director of FTG Printing Ltd. The Company that has traded 20 years in Ghana and had achieved very good levels of growth and return on capital in the past, is now changing. In recent time it has failed to introduce new product lines, relying on traditional products and little has been invested in Research or Product Development. You are a business planning consultant for a firm of Management Consultants, FTG Printing Ltd is one of your clients. In recent times the business has experienced increased tumover but a downtur in overall performance Issah Mohammed who is the director of FTG Printing has had a meeting with your Director and he has stated that he wants to introduce tighter management control within the company by introducing a system of responsibility accounting. You receive the following memo from your Director, Rash Rooney, regarding this case, Memorandum To: Business Planning Assistant Date:/8 May 2020 From: Rash Rooney, Director Subject: FTG Printing accounts information You are aware that I met with Issah Mohammed yesterday and that he is concerned with the latest results shown in the final accounts that have recently been prepared at year end. Page 3 of 7 The file attached contains a summary of the company's abbreviated income statements and statement of financial positions for the past three years, together with additional information and performance indicators for their business sector for the period under review. Examine this information and present of a detailed financial analysis of the company over the three-year period Signed: Rash Rooney Financial information on FTG Printing Ltd. Summary income statements GHSm GHSm GHSm 2017 2019 2018 15.90 14.70 19.80 12.51 13.29 17.46 Sales turnover Operating costs Operating profit before tax Taxation 2.19 2.61 2.34 0.72 0.90 0.81 1.47 1.53 Profit after tax Dividends 0.36 0.48 0.48 Retained profit 1.11 1.23 1.OS 2018 2019 N.B. The firm's detailed breakdown of costs in GHSm is as follows: Years 2017 Labour costs 2.79 Distribution costs 1.32 2.94 3.75 1.47 1.83 Administration costs 0.57 0.66 0.81 Summary statement of financial positions GHSm GHSm GHSm 2017 2018 2019 Non-Current Assets 7.2 8.31 8,64 Current assets Inventory: Raw materials 0.27 0.36 0.45 1.20 1.29 1.35 Finished goods Receivables Bank 3.42 3.96 5.52 0.09 0.12 0.15 4.98 5.76 7.47 Less Current liabilities 4.05 4.68 5.7 Net current assets 0.93 1.05 1.77 8.13 9.36 10.41 1.5 2.73 4.8 Capital and reserves Bank loans 6.63 6.63 6.63 8.13 9.36 10.41 Ghana Printers Association Average ratios for Association members 2019 % Return on capital employed 26.0% Asset turnover 1.79 times Net profit margin Current ratio 14.5% 1.5:1 1.03:1 Acid test ratio Debtors collection period Gearing ratio 83 days 32.0% Labour cost % of sales 18.1% Operating cost % of sales 85.5% Distribution costs % of sales 9.5% Page 5 of 7 Admin costs % of sales 4.5% Required: In your role of Planning Assistant, you are to prepare an analysis of the company's figures over the three-year period using the performance criteria listed in the inter-firm comparison table. a) Calculate all the ratios given in the average ratios for Association members for 2017, 2018 and 2019. (6 Marks) b) Prepare a detailed report on the company's performance in terms of profitability and liquidity compared with the average of the sector over the period. (14 Marks) (Total 20 Marks)