Faculty Faculty of Business and Accounting

Assessment Internal
Paper Code ACFR/A23/I-1
Name Assessment 1
Ex: End/Sup
Corporate
Module
Module Name Financial A7-CFR-13
Code
Reporting

Month January Year 2023

Total Marks 70 marks Due date 27 January 2023

Instructions

1. Include the following details in your cover page: Faculty name; department name; module name and code; the
title of your work; Student Name and ID and lecturer’s name.
2. Submit the assignment through Blackboard on or Before 27 January 2023, 12:00AM.
3. All cases of suspected plagiarism will be treated seriously. Your attention is drawn to the sections on plagiarism
in the student regulations.
4. Use font size 12 point of style Times New Roman with line spacing of 1.5 (Visually impaired students may use
larger fonts). Justify all texts and paragraphs.
5. Save the file in your student Name and ID ( e.g Thato_Tau_SGB1419999_Assign1.docx/ .doc).
6. Submit assignment on Blackboard
7. Do not submit assignments by e-mail
8. No extension will be granted for late submission of this assignment and no correspondence or telephone
conversations will be conducted with the lecturer in this regard.
Financial Statement Analysis Question
As a Financial Analyst, one of your clients Anchor (Pty) Ltd has supplied you with the following
consolidated financial information for the year ended 29 February 2021:
Consolidated Statement of Financial Position as at 29 February 2021
2021 2020
ASSETS P'000 P'000
Non-current assets 251,900 173,030
Property, Plant and Equipment 183,700 109,000
Intangible assets 30,200 33,800
Investment: Marketable security 10,000 10,000
Financial asset 28,000 -
Investment in associate - 20,230

Current assets 229,590 173,820

Inventories 94,000 65,600
Trade and other receivables 131,000 98,000
Cash and cash equivalents 4,590 10,220

Total Assets 481,490 346,850

EQUITY AND LIABILITIES
Equity attributable to the owners of the parent 360,710 242,100
Share capital 180,000 150,000
Retained earnings 166,310 92,100
Revaluation surplus 14,400 -

Non-current liabilities 100,700 92,400

Long-term loan 100,700 92,400

Current liabilities 20,080 12,350

Trade and other payables 9,500 4,000
Short-term portion of long-term loan 9,780 7,350
Provision 800 1,000
Total liabilities 120,780 104,750
Total equity and liabilities 481,490 346,850

Consolidated Statement of profit or loss and other comprehensive Income for the year ended
29 February 2021
2021 2020
P'000 P'000
Revenue 916,440 783,282
Cost of sales (537,600) (425,870)
Gross profit 378,840 357,412
Other income 2,600 1,800
Other operating expenses (249,000) (200,000)
Financial costs (17,000) (12,000)
Share of profit of associate 2,320 2,000
Profit before tax 117,760 149,212
Income tax expense (29,600) (34,397)
 Profit for the year 88,160 114,815

Other comprehensive Income 14,400 -

Revaluation surplus 20,000 -
Tax on revaluation surplus (5,600) -

Total Comprehensive Income for the year 102,560 114,815

Consolidated Statement of Changes in Equity for the year ended 29 February 2021
Share Revaluation Retained
capital Reserve earnings Total
P P P P
Balance at 1 March 2020 150,000 - 92,100 242,100
Change in equity for 2021
Total comprehensive income for the year - 14,400 88,160 102,560
Profit for the year - - 88,160 88,160
Other comprehensive income - 14,400 - 14,400
Dividends - - (13,950) (13,950)
Issue of shares 30,000 - - 30,000
Balance at 29 February 2021 180,000 14,400 166,310 360,710

Additional information:
i) At the end of 2020 there were 100 000 shares in issue and from the beginning of 2021
there were 120 000 shares in issue. The 2019 closing share price was P3.30 per share while
the 2021 closing share price was P2.50.
ii) There is no non-controlling interest as the company owns 100% of its subsidiary.

Required:
Your client has requested you to make a report analysing their business focusing on the following:
a) Calculate the following ratios and provide an insight on each ratio to your client;
i. Change in revenue (%)
ii. Gross Profit Margin
QP-ASM-001|Rev 004

iii. Net Profit Margin

iv. Earnings per share
v. Capital gearing ratio
vi. Current ratio
vii. Acid-test ratio
viii. Cash ratio
ix. Return on Equity.
x. Return on Capital Employed
xi. Asset turnover
xii. Dividend payout ratio (24 marks)

b) You are required to use the Horizontal and Vertical financial statement analysis to analyse the financial
statements of Anchor (Pty) Ltd. (20 marks)

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 c) Calculate the 2021 ROE for Anchor (Pty) Ltd using the Du-Pont equation, based on market values.
(6 marks)
d) You are required to calculate the 2020, Z-score and provide insightful comments. (10 marks)

e) You are required to compute the A-score and provide insightful comments. Given that the Chief
executive of the organisation is autocratic and also the board chairman. The board is seen by the
directors as weak, with individuals with one set of skills. The board has note that the management of
the organisation has a wide range of skills, with a highly skilful finance director. The finance director
has been able to ensure that the organisation prepares budgets in time, with effective internal
control system being established over the past year. Furthermore, a proper management accounting
department has been established that will ensure effective production and cost management. The
finance manager has ensured that the organisation pays off most of its debt to allow them to
undertake major projects with success. There is however indication of overtrading. During the covid-
19 period the organisation has been making efforts to effectively respond to market changes. The
financial statements of the organisation have been audited and an unqualified report receive. The z-
score has deteriorated over the past two years as well as the quality of services and moral of the
staff, with resignations increasing each quarter. (10 marks)

[Total: 70 mark]
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****** End of Assignment******

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