QUESTION FOUR B
Madina Ltd is engaged in the processing of palm fruits to produce palm oil and palm kernel oil. The Statement of Profit or Loss for the year ended 2021 is as follows:
Revenue: GH000 123,817
Cost of sales: (84,940)
Net gains from changes in fair value of biological assets: 84
Gross profit: 38,961
Administrative expenses: 11,727
Other income: 1,267
Operating profit: 28,501
Finance income: 888
Profit before income tax: 29,389
Income tax expense: (4,692)
Profit for the year: 24,697
For the year ended 2020, the Statement of Profit or Loss is as follows:
Revenue: GH000 95,620
Cost of sales: (76,240)
Net gains from changes in fair value of biological assets: 754
Gross profit: 20,134
Administrative expenses: (8,494)
Other income: 927
Operating profit: 12,567
Finance income: 508
Profit before income tax: 13,075
Income tax expense: (3,422)
Profit for the year: 9,653
The Statement of Financial Position as at 31 December 2021 is as follows:
Assets:
Non-current assets:
Property, plant & equipment: 57,909
Financial asset: 5,221
Total non-current assets: 63,130
Current assets:
Inventories: 8,490
Trade Receivables: 24,663
Cash and cash equivalents: 22,832
Total current assets: 55,985
Total assets: 119,115
Equity & Liabilities:
Share capital: 2,000
Retained Earnings: 97,634
Total equity: 99,634
Non-current liability:
Deferred taxation: 9,394
Current liabilities:
Accrued expenses: 477
Trade payables: 6,957
Current income tax liabilities: 2,653
Total current liabilities: 10,087
Total equity & liabilities: 119,115
The following ratios have been gathered from the food and processing industry for the year ended 31 December 2021:
Return on Equity %: 23.52
Gross profit margin %: 29.57
Net profit margin %: 22.16
Current ratio (times): 2.5
Acid test ratio (times): 1.8
Inventory turnover (days): 20
Trade receivables collection (days): 68
Trade payables settlement (days): 32
Required: Write a report to the Board of Directors of Madina Ltd. assessing the company's performance for the year ended 31 December 2021 in relation to the industry and the comparative year. (Total: 20 marks)