Question 5
Below is an extracts from Eco bank and Cal Bank financial statements;
Extracts from statements of financial position
Equity & Liabilities
Eco Bank Cal Bank Assets
Eco Bank
Cal Bank
GH¢m
GH¢m
GH¢m
GH¢m
Equity & Reserves
51,690
72,114 Fixed assets
34,460
48,076
Long term loan
12,000
36,057 Trade debtors
24,470
44,030
Trade creditors
35,790
45,135 Cash and bank
18,850
49,700
Other payables
8,500 Stock in trade
21,700
20,000
99,480 161,806
99,480
161,806
Extract from Statement of Comprehensive Income
Eco Bank
Cal Bank
GH¢m
GH¢m
Revenue
161,600
220,150
Cost of sales
(135,160)
(180,520)
Gross profit
26,440
39,630
Operating expenses
(9,840)
(13,870)
6| Page
(720)
(2,313)
Interest expense
15,880
23,447
Profit before tax
Income tax
(333)
(409)
Profit after tax
15,547
23,038
Dividend proposed
5,000
8,200
Eco bank has 30,000 ordinary shares currently selling at €1.5, whiles Cal bank has 40,000
ordinary shares currently selling at GH¢1.6
Required:
-a). Calculate the following three (3) investment ratios of interest to a potential investor; return on
equity (ROE), earnings per share (EPS), and dividend cover.
b). Calculate the following three (3) ratios of interest to a potential long-term lender: gearing
(debt/Equity) ratio, current ratio and interest cover.
c). Report briefly on the performance and state of the business, from the point of view of a
potential shareholder and secondly, a potential lender using the ratios calculated above.
(Total 25 marks)
17:02
