NBAA revision question #2345

Fadama Ltd is a listed manufacturing company that plans to increase its production capacity. Below are the most recent financial statements of the company.

Statement of Financial Position as at 31 March

  Non-Current Assets 2017 GH¢000 2016 GH¢000
Property, plant & equipment 22,500 21,000
Intangibles    1,000       904
  23,500 21,904
Current Assets Inventories   1,680   2,250
Trade and other receivables 520 420
Investments 76 36
Cash and cash equivalents         10        60
    2,286   2,766
Total assets 25,786 24,670
  Equity Ordinary share capital     12,000     10,500
General reserves 3,600 2,850
Revaluation surplus 1,500 712
Retained earnings   4,022   6,738
  21,122 20,800
Non-current liabilities Preference share capital (redeemable)       1,520      1,200
Current liabilities Trade and other payables   444   420
Taxation 1,200 1,050
Ordinary dividend payable   1,500   1,200
    3,144   2,670
Total equity and liabilities 25,786 24,670



You have been provided with the following additional information in relation to Fadama

Ltdʼs trading performance for the years ended on the stated dates:

  31/3/2017 31/3/2016
  Revenue GH¢000 6,800 GH¢000 5,600
Cost of sales (4,080) (2,800)
Operating expenses (758) (714)

Required:

Write  a  report  to  the  Chief  Executive  Officer  of  Fadama  Ltd,  concisely  analysing  theprofitability and working capital management of the firm. Your report should be supported with appropriate ratios. 

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