Reference no: EM132336200
Scenario
Task A - Financial Statement Analysis
The Directors of Ali Abdullah (LLC) have being presented with the following abridged financial statements. They have requested the accounts manager to provide a report over the past five years of the financial statements.
Statements of comprehensive income for the year ending December,
|
|
2014
|
2015
|
2016
|
2017
|
2018
|
|
Sales
|
11,863
|
14,952
|
16,349
|
17194.8
|
15531.55
|
|
Cost of goods sold
|
8,537
|
11,124
|
12,016
|
12792.6
|
11415.2
|
|
Gross profit
|
3,326
|
3,828
|
4,333
|
4402.2
|
4116.35
|
|
Operating expenses
|
2,276
|
2,471
|
2,793
|
2841.65
|
2653.35
|
|
Operating Profit
|
1,050
|
1,357
|
1,540
|
1560.55
|
1463
|
|
Finance cost
|
73
|
188
|
200
|
216.2
|
190
|
|
Profit before Tax
|
977
|
1,169
|
1,340
|
1344.35
|
1273
|
|
Tax
|
390
|
452
|
576
|
519.8
|
547.2
|
|
Profit for the year
|
587
|
717
|
764
|
824.55
|
725.8
|
Statements of Financial Positions for the year ending December,
|
|
2014
|
2015
|
2016 |
2017
|
2018
|
|
Non- Current Asset
|
|
|
|
|
|
|
Property, Plant and equipment
|
2581
|
4430
|
4364
|
5094.5
|
4145.8
|
|
|
2581
|
4430
|
4364
|
5094.5
|
4145.8
|
|
Current Assets
|
|
|
|
|
|
|
Inventories
|
2031
|
2613
|
3287
|
3004.95
|
3122.65
|
|
Receivables
|
1963
|
2870
|
4051
|
3300.5
|
3848.45
|
|
Cash
|
561
|
387
|
202
|
445.05
|
191.9
|
|
|
4555
|
5870
|
7540
|
6750.5
|
7163
|
|
Total Assets
|
7136
|
10300
|
11904
|
11845
|
11308.8
|
|
Equity and Liabilities
|
|
|
|
|
|
|
Current Liability
|
|
|
|
|
|
|
Payables
|
1862
|
2944
|
3613
|
3385.6
|
3432.35
|
|
Accruals
|
301
|
516
|
587
|
593.4
|
557.65
|
|
Bank over draft
|
250
|
900
|
1050
|
1035
|
997.5
|
|
|
2413
|
4360
|
5250
|
5014
|
4987.5
|
|
Long term liabilities
|
|
|
|
|
|
|
Long term loan
|
500
|
1000
|
950
|
1150
|
902.5
|
|
|
500
|
1000
|
950
|
1150
|
902.5
|
|
Total liabilities
|
|
|
|
|
|
|
|
2913
|
5360
|
6200
|
6164
|
5890
|
|
Equity
|
|
|
|
|
|
|
Share Capital
|
|
|
|
|
|
|
Retained profits
|
2750
|
2500
|
2500
|
2875
|
2375
|
|
Total Equity
|
1473
|
2440
|
3204
|
2806
|
3043.8 |
|
|
4223
|
4940
|
5704
|
5681
|
5418.8
|
|
Total equity and Liabilities
|
7136
|
10300
|
11904
|
11845
|
11308.8
|
The Shareholders of All Abdullah (LLC) are concerned about the organization's financial performance over the last 5 years. Therefore, the Board of Directors has requested you to prepare a report analyzing the financial performance of the organization over the last 5 years. The report should include the following;
a. A common size analysis and Index analysis for the statements of comprehensive income and statements of Financial Positions
b. An analysis of the organization's profitability, Liquidity, efficiency and solvency over the last 5 years. Your analysis should evaluate the strength and weaknesses of the organization's performance including graphs depicting the trend over the last 5 years.
Below are the ratios that should be used in your analysis
Profitability (Gross profit margin; Net profit margin; Return on Capital Employed)
Efficiency (Inventory Holding Period; Settlement period for trade receivable; settlement period for trade payables)
Liquidity (Current Ratio; Acid test ratio)
Solvency (Gearing ratio; interest Cover)
Task B - Project Risk Analysis
Ali Abdullah LLC is further considering to invest in two mutually exclusive projects. The projects are Project A and Project B. The possible NPVs for each project and their associated probabilities are as follows;
|
project A
|
|
NPV($m)
|
Probability of occurrence
|
|
20
|
0.1
|
|
40
|
0.5
|
|
50
|
0.4
|
|
project B
|
|
NPV($m)
|
Probability of occurrence
|
|
30
|
0.6
|
|
40
|
0.2
|
|
80
|
0.2
|
Required:
1. Calculate Expected NPV
2. Calculate the Standard Deviation of NPV
3. Appraise the management about this project with your comments.