You are working as an intern at an investment consultancy and have been asked to undertake some initial financial analysis of Terok Nor plc - A mining and refining company with operations in both the UK and South Africa. Terok Nor plc Income Statement for the year ended 31st May 2022 (Extract) Revenue Cost of Sales Gross Profit Operating Expenses Operating Profit Non-current Assets (NBV) Current Assets Terok Nor plc Statement of Financial Position as at 31st May... (Extract) Trade receivables equivalents Inventory Cash & cash Equity Current Liabilities Trade payables Other current liabilities Non-current liabilities m 99 156 46 200 50 2022 m 801 301 1,202 250 610 342 1,202 m 1,010 (800) 210 (50) 160 30 days 70 days 2021 m 120 160 70 210 55 Additional Information Your line manager has provided you with industry benchmarks to assist your analysis. Trade receivable days Trade payable days m 741 350 1,091 265 600 226 1,091 Inventory turnover Current ratio 'Acid Test' ratio Gross profit margin 50 days 1.5:1 1:1 30% Operating profit margin ROCE Debt/Equity ratio All sales and purchases are on credit. Required a) For the year ended 31st May 2022 calculate FIVE ratios (calculate to 2 decimal places). (10 marks) 18% 12% 60% b) Based on the additional information provided and the ratios completed in part (a) you are to undertake the following for each ratio: i. ii. iii. Explain what the ratio shows. Explain the potential causes and implications for the business of the figure calculated. Describe (where appropriate) any possible actions the business could take to improve each ratio. (25 marks) Now you must decide whether you would include a 'buy' or 'sell' recommendation on this company. c) Based on the analysis you completed in parts (a) and (b) PLUS wider industry and/or economic knowledge, you should provide a justified decision on whether to 'buy' or 'sell'. (5 marks) You are working as an intern at an investment consultancy and have been asked to undertake some initial financial analysis of Terok Nor plc - A mining and refining company with operations in both the UK and South Africa. Terok Nor plc Income Statement for the year ended 31st May 2022 (Extract) Revenue Cost of Sales Gross Profit Operating Expenses Operating Profit Non-current Assets (NBV) Current Assets Terok Nor plc Statement of Financial Position as at 31st May... (Extract) Trade receivables equivalents Inventory Cash & cash Equity Current Liabilities Trade payables Other current liabilities Non-current liabilities m 99 156 46 200 50 2022 m 801 301 1,202 250 610 342 1,202 m 1,010 (800) 210 (50) 160 30 days 70 days 2021 m 120 160 70 210 55 Additional Information Your line manager has provided you with industry benchmarks to assist your analysis. Trade receivable days Trade payable days m 741 350 1,091 265 600 226 1,091 Inventory turnover Current ratio 'Acid Test' ratio Gross profit margin 50 days 1.5:1 1:1 30% Operating profit margin ROCE Debt/Equity ratio All sales and purchases are on credit. Required a) For the year ended 31st May 2022 calculate FIVE ratios (calculate to 2 decimal places). (10 marks) 18% 12% 60% b) Based on the additional information provided and the ratios completed in part (a) you are to undertake the following for each ratio: i. ii. iii. Explain what the ratio shows. Explain the potential causes and implications for the business of the figure calculated. Describe (where appropriate) any possible actions the business could take to improve each ratio. (25 marks) Now you must decide whether you would include a 'buy' or 'sell' recommendation on this company. c) Based on the analysis you completed in parts (a) and (b) PLUS wider industry and/or economic knowledge, you should provide a justified decision on whether to 'buy' or 'sell
