Financial Solution net

[email protected], 2014_08 ([email protected])

MEMO

To Managing Director (Fan Milk Limited ),

From Individual Financial Analyst

Date 20/08/2014

Subject Five Year Financial Performanceof Fan Milk Limited

The following are the summarized financial statements of fan

milk Limited for the past five years.

STATEMENT OF COMPREHENSIVE INCOME

All amounts are expressed in thousands of Ghana cedis

2012 2011 2010 2009 2008

GH¢ GH¢ GH¢ GH¢ GH¢

[Type text] Page 1

Revenue

147,2

12.00

109

,280.00

103,7

75.00

82,

471.00

55,

041.00

Cost of Sales

(69,

799.00)

(51

,908.00

)

(48,2

93.00)

(38,4

60.00)

(28,5

99.00)

Gross Profit

77,

413.00

5

7,372.0

0

55,4

82.00

44,

011.00

26,

442.00

Distribution

Cost

(33,

780.00)

(25

,560.00

)

(22,3

42.00)

(18,6

28.00)

(12,5

69.00)

Administrativ

e Cost

(11,

375.00)

(

8,429.0

0)

(8,

432.00)

(6,

184.00)

(4,

873.00)

Other Income

446.00

350.00

141.00

759.00

500.00

Operating

Profit

32,

704.00

23,733.

00

24,8

49.00

19,

958.00

9,

500.00

2

Interest

Received - -

1,

120.00

41

8.00 -

Finance

Income

4

,067.00

1,680.0

0 - - -

Finance Cost

(329.00

)

(162.00

)

(156.00

)

(

201.00)

(

113.00)

Profit Before

Tax

36,

442.00

2

5,251.0

0

25,8

13.00

20,

175.00

9,

387.00

IncomeTax

Expenses

(9,

244.00)

(

6,432.0

0)

(6,

443.00)

(5,

019.00)

(2,

333.00)

Profit After

Tax

27,

198.00

1

8,819.0

0

19,3

70.00

15,

156.00

7,

054.00

3

Other

comprehensive

, income

1.00

1.00

-

-

-

27,19

9.00

18,

820.00

19,370

.00

15,15

6.00

7,0

54.00

STATEMENT OF FINANCIAL POSITION

All amounts are expressed in thousands of Ghana cedis

2012 2011 2010 2009 2008

ASSETS GH¢ GH¢ GH¢ GH¢ GH¢

Non Current

Assets

P P E

51

,904.0

0

4

3,771.0

0

29,

530.00

23

,269.0

0

15

,084.0

0

Current Assets

Inventory 15

,640.0

1

2,679.0

9

,739.0

9

,656.0

6

,811.0

4

0 0 0 0 0

Trade

Receivables

4,080.

00

2,215.0

0

2

,971.0

0

2

,318.0

0

2

,129.0

0

Cash and Cash

Equivalent

24

,929.0

0

2

4,416.0

0

26,

151.00

15

,871.0

0

8

,834.0

0

Total Assets

96,5

53.00

83,

081.00

68,39

1.00

51,1

14.00

32,8

58.00

EQUITY AND LIABILITIES

Equity

Stated Capital

10

,000.0

0

1

0,000.0

0

10,

000.00

6

,000.0

0

6

,000.0

0

Income Surplus

51

,681.0

0

5

2,372.0

0

42,

126.00

29

,082.0

0

15

,410.0

0

61

,681.0

6

2,372.0

52, 35

,082.0

21

,410.0

5

0 0 126.00 0 0

Liabilities

Non Current

Liabilities:

De

ferred Tax

3,664.

00

2,824.0

0

1

,735.0

0

1

,330.0

0

808.00

Current

Liabilities:

Tra

de Payables

21

,595.0

0

1

7,382.0

0

14,

031.00

14

,272.0

0

9

,719.0

0

Inc

ome Tax

311.00

103.00

162.00

137.00

699.00

Div

idend Payables

9,302.

00

400.00

337.00

293.00

222.00

6

34

,872.0

0

2

0,709.0

0

16,

265.00

16

,032.0

0

11

,448.0

0

Total EquityAnd

Liabilities

96,5

53.00

83,

081.00

68,39

1.00

51,1

14.00

32,8

58.00

Required:

Assume that you are an external consultant to fan milk

Limited. Prepare a report for the board of directors

commenting on the performance of the business over the five

years using ratios and any other information that you consider

appropriate.

Your report should address the following issues:

Reasons for using ratio analysis

Description and justification of the ratios you decided

to use.

Calculation of the ratios.

Findings of your analysis with recommendations for

future consideration by fan milk Limited.

7

Limitations of your analysis with regards to the

information you have been provided; what kind of

information could help you to develop a more robust

ratio analysis?

Limitations of ratio analysis in general.

Contents1.0 Introduction...................................................31.1 Concepts of Ratio Analysis.....................................4

2.1 Liquidity or Short term solvency ratios........................42.1.1 Current Ratio................................................5

8

2.2.1 Quick Ratio..................................................62.3.1 Debt Collection Period.......................................7

3.0 Activity or efficiency ratios..................................73.2 Sales to Capital Employed....................................8

3.3 Receivables Turnover Period....................................84.0 Long term financial stability ratios...........................8

4.1 Fixed Interest Cover...........................................94.2 Fixed Dividend Cover...........................................9

4.3 Debt Ratio....................................................105.0 Profitability ratios..........................................10

5.1 Gross Profit Margin...........................................115.2 Net Profit Margin.............................................11

5.3 Return on capital employed (ROCE).............................116.1 limitations of the company (Fan Milk Limited).................12

6.2 Limitations associated to Ratio Analysis......................127.1 Conclusion....................................................13

7.2 Recommendation................................................14Reference.........................................................16

Appendix..........................................................17Appendix A: Short Term Liquidity for the five year period.........17

Appendix B: Activity or Efficiency Ratios.........................18Appendix C: Gearing or Long term Financial Stability Ratio.......18

Appendix D: PROFITABILITY RATIOS..................................19

1.0 Introduction

9

This financial report is to analyze five fiscal years of the

Fan Milk Limited for the Board of Directors. The main

objective of this report is to represent independent and fair

performance of the company’s business.

This also go a long way in representing and assuming with

references all other information that may lead to the true

representation of figure obtained by the company’s operation

in the five financial years. This analysis is mainly based an

empirical mathematical means called the Ratios Analysis.

“Ratio Analysis is a form of Financial Statement Analysis

that is used to obtain a quick indication of a firm's

financial performance in several key areas. The ratios

are categorized as Short-term Solvency Ratios, Debt

Management Ratios, Asset Management Ratios,

Profitability Ratios, and Market Value Ratios”.

(zenwealth.com, August 2014)

This tool has many essential fields. Data in financial

statements of companies are to make available for scrutiny.

Manipulation of data via ratios enables evaluation of

companies of various sizes. This helps in comparing the

10

financial performance within a particular industry averages.

In further pursuit ratios can be used in tend analytical ways

to show areas of performance or failures in respect of a given

period.

Since the ratios are focused on available Accounting

Information, efficiency is restricted by the biases obtained

from financial statements as a result of Historical Cost

Accounting and Inflation. Hence, Ratio Analysis ought only to

be applied as the initial phase any financial analysis, to

acquire a fast sign of company’s performance and to detect

areas which need much further scrutiny.

This report will present the most widely use ratio analysis in

each areas given above to access the realistic performance of

Fan Milk limited. The Directors should note that there is no

well accepted agreement on the number or ratios to use in all

analysis. Therefore comparing the ratios to the industrial

average has to use the same formulation as shown below.

1.1 Concepts of Ratio AnalysisAnalysis and interpretation of the ratios including the

justification of the ratios used

11

In the analysis of fan milk Limited to indicate the

performance of the company’s business over a period of five

years, the accounting ratios of the fiscal year are computed

under four main categories:

a. Liquidity or Short term solvency ratios

b. Activity or efficiency ratios

c. Long term solvency and financial stability ratios

d. Profitability ratios

2.1 Liquidity or Short term solvency ratiosShort term Solvency Ratios try to quantify the ability of the

fan milk Limited to see its short term financial

responsibilities. These ratios pursue to control the capacity

of the firm to prevent financial constraints in the short

period. The two greatest vital Short-term Solvency Ratios are

the Quick Ratio or Acid-Test Ratio and the Current Ratio. Debt

Collection Period, Inventory Turnover and Inventory Turnover

Period were also considered.

Table 1.1: Liquidity or Short term solvency ratios analysis

12

2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Current Ratio (%) 1.43 2.20 2.67 1.89 1.67Quick Ratio (%) 0.93 1.49 2.00 1.24 1.03Debt Collection Period (365 days)

281.58 1847.08 324.89 350.12 -

Inventory Turnover Period(365 days) 74.04 78.82 73.29 78.14 -Inventory Turnover 0.20 0.22 0.20 0.21 -

2.1.1 Current Ratio

It is a liquidity ratio and also termed as capital ratio,

shows the proportion of current assets of the business in

relation to its current liabilities. According to Atrill and

McLaney (2006) the ideal current ratio is usually 2:1 for all

businesses. This means that the current assets are enough to

cover two times the amount of the company’s liabilities. In

real terms a company will like to manage current ratio of not

less than 1 to provide cushioning from any unforeseeable

contingencies which may arise in the short term.

In this event it has to be test over a period before one give

the base line. Considering information in table 1.1, it show

that during the five year period the current ratio of Fan Milk

limited has being appreciative with all having significant

figures above 1. The company did appreciatively well from 2009

13

to 2011, this may be as a result of the use of resources tied

up in working capital that may have been put into more

profitable use elsewhere. In other terms in 2008 might have

been the risky strategy that could have caused liquidity

problems for Fan milk Limited. In 2012 dropped to 1.43 far

below the preceding once, this may be on the account of

expansion that saw it long term liabilities swell up while the

company try to maintain its assets.

2.2.1 Quick Ratio

This ratio is also known as the Acid Test Ratio, it gives the

relation between current assets without inventories and to

that of the company’s liabilities comparatively. The

mathematical formula is can be found in the appendix.

According to accounting-simplified.com (August, 2014):

Quick ratio shows the extent of cash and other current

assets that are readily convertible into cash in

comparison to the short term obligations of an

organization. A quick ratio of 0.5 would suggest that a

14

company is able to settle half of its current liabilities

instantaneously

This shows solvency of the company and always assessed our

time period. A quick ratio of 0.5 may suggest that the company

will be able to settle half of its current liabilities

suddenly. If the ratio is larger than company’s average this

may as a result of investing too many resources in the capital

employed in the firm which may more profitably be used

elsewhere. From the table 1.1, it can be assumed that the

company has too much unused cash across the five year as the

ratio increase steadily from 2008 to 2010.

The quick ratio was higher in 2010 then reduces from 2.0 to

0.93, this suggests that the company was going for too much

risk and not maintaining the exact buffer of liquid resource.

Another is, the company is obtaining a better credit

accessibility with suppliers other than competitors.

2.3.1 Debt Collection Period

15

Debt is the owed business money by companies or entities.

Therefore debt collection period is the average receivables

taken in days; the company receives money from people who owed

them. The earlier the debtor pays the better is it for the

company, therefore debtor’s collection period of shorter days

is good. Quick payment helps cashflow and minimizes the risk

of customers not paying owed money. The formula is found in

the appendix.

The Fan Milk limited in 2008 had no debt to collect since

there were no opening receivables; in 2009 it obtained its

highest debt collection period this was as a result allowing

more creditors to owe for a longer period since it was now

establish market completion. This then appreciated for two

years which is as a result of debtor’s paybacks. This then

became much higher in 2012, 281.58days, this was attributed to

more purchase of inventory on credit.

2.0 Activity or efficiency ratios3.0

Efficiency ratios examine the ways in which various resources

of the business are managed (Atrill and Mclaney, 2006). The

16

ratios consider in the table are some of the more important

aspects of resource management:

Table 1.2: Activity or efficiency ratios of Fan Milk Limited

2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Sales to Assets Ratio 1.52 1.32 1.52 1.61 1.68Sales to Capital Employed 2.25 1.68 1.93 2.26 2.48Receivables TurnoverPeriod 16.46 18.23 19.99 21.10 -3.1 Sales to Asset Ratio

It is the sales made by the company compared with its assets.

The higher the ratio the better it is for the firm in

performance, if it low then the investment or the capital

employ is depreciative to market sale hence low profit margin.

In table1.2, the ratio has being performing fairly well since

the assumed minimum is 1. Hence product sales has being good

throughout the five years.

3.2 Sales to Capital Employed

The sales revenue to capital employed ratio (or asset turnover

ratio) examines how effectively the assets of the business are

being used to generate sales revenue. Generally speaking, a

higher asset turnover ratio is preferred to a lower one. A

17

higher ratio will normally suggest that assets are being used

more productively in the generation of revenue. From 2008 to

2011, the ratio was deteriorating. This was a result of

borrowing in terms of long term loans for product expansion

while maintaining sales, but after this it then appreciated in

2012 with a rise.

3.3 Receivables Turnover PeriodA business will usually be concerned with how long it takes

for customers to pay the amounts owing. The speed of payment

can have a significant effect on the business’s cash flow. If

it takes long time the poorer the cashflow and if it’s shorter

the better. In table 1.2 is by comparing average receivable to

the cost of sales of the firm. This that from 2009 to 2012 the

period was appreciating, this shows that customers are able to

pay quicker.

4.0 Long term financial stability ratios This occurs when a business is financed, at least in part, by

borrowing, instead of by finance provided by the owners (the

shareholders). The table 3.1 look at some of them for the five

year period.

18

Table1. 3: Long term financial stability ratios

2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Fixed Interest Cover110.77 155.87 158.29 98.29 83.07

Fixed Dividend Cover 3.92 63.13 73.27 67.43 42.28Proprietary ratio 1.38 1.59 1.34 1.26 1.20Debt Ratio 36.12 24.93 23.78 31.37 34.84Long term debt to Shareholders fund

4.1 Fixed Interest Cover

The interest cover ratio measures the amount of profit

available to cover interest payable. This ratio shows that the

level of profit is considerably higher than the level of

interest payable (Atrill and Mclaney, 2006). The lower the

level of profit coverage, the greater the risk to lenders that

interest payments will not be met, and the greater the risk to

the shareholders that the lenders will take action against the

business to recover the interest due.

The equation can be seen in appendix. Considering table 1.3,

the interest cover ratio has increased dramatically from a

position where profit covered interest 83.05 times in 2008, to

one where profit covered interest only 110.77 times in 2012.

19

This was partly caused by the increase in borrowings in from

2008 successively to 2012, but mainly caused by the dramatic

increase in profitability.

4.2 Fixed Dividend Cover

This the ratio of comparing net profit after interest and tax

to preference dividend paid. The higher the profit after

deductible tax the better and if the preference dividend paid

is higher the poorer the cover. If the ratio is higher the

better for the company as profit increase. In table 1.3 above,

it appreciated form 2008 at 42.28 to 2010 at 73.27, thus

profit is high but then decline to a very low in 2012 at 3.92.

This be the cause of increase in customer’s credit hence less

casflows.

4.3 Debt Ratio

It is the comparison of total debt to the total assets of the

company performance. The lower the ratio the better as the

company is less likely to liquidate. Looking at the table 1.3,

from 2008 at 23.78% to 2010 at 34.84%. The debt ratio then

became worst by increase to 36.12% in 2012 which shows that,

20

the company might have gone through major borrowing for

expansion.

5.0 Profitability ratios

The following ratios may be used to evaluate the profitability

of the business:

Expense/sales

Return on capital employed;

Net profit margin; and

Gross profit margin.

Table 1.4: Profitability ratios

2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Gross Profit Margin 52.59 52.50 53.46 53.37 48.04

Net Profit Margin 18.48 17.22 18.67 18.38 12.82Expense/Sales 30.67 31.10 29.65 30.09 31.69

ROCE 0.56 0.39 0.46 0.54 0.42

5.1 Gross Profit Margin

21

The gross profit margin ratio relates the gross profit of the

business to the sales revenue generated for the same period.

Gross profit represents the difference between sales revenue

and the cost of sales (Atrill and Mclaney, 2006). This is an

increase in 2008 at 48.04% to 53.46% in 2010 and then slightly

decline to 52.50%in 2011and to 52.59% in 2012. This shows that

profit margin was relatively higher than sales revenue.

5.2 Net Profit Margin

The net profit margin ratio relates the net profit for the

period to the sales revenue during that period. This ratio

compares one output of the business (profit) with another

output (sales revenue). In 2008 was 12.82% and marginally

increase over the five year period with an average of 18.5%

may be the cause of stabilizing the operating cost with income

received was also appreciative.

5.3 Return on capital employed (ROCE)

The return on capital employed is a fundamental measure of

business performance. This ratio expresses the relationship

between the net profits generated during a period and the

22

average long-term capital invested in the business during that

period (Atrill and Mclaney, 2006).

ROCE increase from 0.42 in 2008 to 0.54 in 2009 depicts the

company is giving shareholders more for their money, which is

represented by shareholders' equity. This then dropped to 0.36

in 2011 is caused by reduce in capital employed by management.

In 2012 the company then increase their investment due

increase in companies casflow from the customer payables.

6.1 limitations of the company (Fan Milk Limited)

The company analysis based on the accounting information makes

it limited in efficiency by distortions that is created in

the statement as a result of Historical cost computations and

Inflation. The ratio is limited how much interest income

profit is available. Also there may be hidden influences such

as how much deliverable was made.

Therefore it is also essential to recall some of the other

limitations such as:

23

Ratios does not consider things like quality product,

care of the customer, employee morale, which plays a

vital role in Fan Milk company

The company duel in the past data therefore it is

difficult to present whether the assumptions made are

real for future.

Fan Milk Company did not present any industrial bench

mark that the analysis can be based on hence ideal

situations are use making it difficult to comment on real

performance.

The ability to manipulate figure to suit delays in

creditor payment to later part of the year may not

present true picture of whether the company’s debt ratios

were viable to profit growth

6.2 Limitations associated to Ratio Analysis

Limitations of ratio analysis:

Ratios are only as reliable as the financial statements

from which they derive.

Ratios have restricted vision.

24

It can be difficult to find a suitable benchmark (for

example, another business) to compare with.

Some ratios could mislead due to the ‘snapshot’ nature of

the balance sheet.

7.1 Conclusion

After assessing Fan Milk Limited with Ratio Analysis, it was

realize that the company

Liquidity or Short term solvency ratios during the period stood

strongly by 2012 as Current Ratio (%) 1.43, Quick Ratio (%) 0.93,

Debt Collection Period (365 days) 281.58, Inventory Turnover

Period(365 days) 74.04, Inventory Turnover 0.20 this made the

company solid.)

Financial statement analysis involves analyzing the firm's

financial statements to extract information that can

facilitate decision-making. The use of accounting ratios as

one of techniques used in financial statements analysis can

guide management in decision making by playing a centre role

in measuring the strength and weaknesses of the firm. Ratio

analysis for a business enterprise like Fan Milk Limited its

efforts to derive quantitative measures or guide concerning

25

the expected capacity of the firm to meet its future financial

obligations or expectations. Based on findings, the company

gives much significance in profitability ratios, the

management staff of the company believe that, net profit

margin ratio, not only displays the profitability of the

company comparing to sales, but also the net profit ratio cans

help in expenses management. It is observed that, others

ratios like expenses analysis ratio and gross margin ratio

play a great role to determine the profitability, as gross

margin ratio decreases and the expenses analysis ratio

increases the net profit ratio decreases. There is a strong

relationship of these ratios to measure profitability of a

company in order to control expenses within the income earned

to take measures for the future financial expenses and

revenues.

Hence the company made an immersed profit over the five year

period.

7.2 Recommendation

Based on the research findings, skills of the researcher and

other constraints accounted, we can finish this work by giving

26

the following recommendations that aimed at further improve

decision making by the use of accounting ratios for the great

success of Fan Milk Limited:

1. Since the profit seems to be the same based on the periods

of this study, and this profit earned is obtained with

different sales turnover, for a better understanding of

performance and profitability in Fan milk, the company should

calculate expenses analysis ratio, gross margin ratio and net

profit ratio for each period covered. It is through this

analysis that a company can be able to assess the expenses

incurred comparing to sales realized and gross margin obtained

for a better control of production cost and other expenses.

2. The company should improve its capacity to attract

potential investors by calculating its return to equity ratio

and compare it to the result of this ratio from the firms in

same industry to test their ability to increase the equity

even from the external resources that the company can benefit

from potential investors.

3. The computation of multiple discriminate analysis should be

made at the end of each accounting period to assess the

27

historical data in order to predict the financial failure not

for Fan Milk Limited as our case study, but also for the other

business entity to verify their going concern situation.

4. The management of the company should look for the means of

disclosing company's financial statement to the professional

accountants in order to get advices and recommendations from

these experts to get the fully disclosed financial statement

on which financial analysis could be conducted in decision

making

5. As in the country there is a lack of accounting

regulations, there should settings and training for the

academician accountants so that they can fill gaps of shortage

of professional accountants in the country.

28

Reference Atrill, P. and McLaney, E. (2006) ACCOUNTING AND FINANCE for Non-

Specialists, Prentice Hall Europe

Elliott, B. and Elliott, J. (2004) Financial Accounting and Reporting,

9th edn, Financial Times Prentice Hall.

Revsine, L etal (2004) Financial Reporting and Analysis, 3rd edn,

Prentice Hall, 2004, chapter 5.

29

http://accounting-simplified.com/financial/ratio-analysis/

quick-acid test.html#sthash.B7XjDL4U.dpuf 20th August, 2014,

12pm

30

Appendix

Appendix A: Short Term Liquidity for the five year period

Long term and Short Term Liquidity for the five year period2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Current Assets 44649 39310 38861 27845 17774Current Liability 31208 17885 14530 14702 10640Inventories 15640 12679 9739 9656 6811

Current Ratio (CR) 1.43 2.20 2.67 1.89 1.67

Quick Ratio QR 0.93 1.49 2.00 1.24 1.03

2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Average Receivables3147.5

011209.

002644.5

02223.5

0 -

Credit Sales4080.0

02215.0

02971.0

02318.0

0 -

31

a. Current Ratio (CR) ¿ CurrentAssetsCurrentLiability

f. D

ebtCollectionPeriod=AverageReceivablesCreditSales

∗36days

e. Inventory Turn¿AverageInventory

CostofSales

g. Creditor Payment

Period=AveragePayablesCreditPurchase

∗36days

Cost of Sales69799.

0051908.

0048293.

0038460.

0028599.

00

Average Inventories14159.

5011209.

009697.5

08233.5

0 -Debt Collection Period (365 days) 281.58

1847.08 324.89 350.12 -

Inventory Turnover Period 74.04 78.82 73.29 78.14 -Inventory Turnover 0.20 0.22 0.20 0.21 -

Creditors Payment Period

Appendix B: Activity or Efficiency Ratios

2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Sales 14721210928

0 103775 82471 55041Assets 96553 83081 68391 51114 32858Capital Employed 65345 65196 53861 36412 22218Average Receivables

1148837.5

946445

965242.5

811577.5 -

Cost of Sales 69799 51908 48293 38460 28599

Sales to Assets Ratio 1.52 1.32 1.52 1.61 1.68Sales to Capital Employed 2.25 1.68 1.93 2.26 2.48Receivables Turnover Period 16.46 18.23 19.99 21.10 -

32

Sales to Assets RatioSales to Capital EmployedInventory Turnover PeriodReceivables Turnover Period

Appendix C: Gearing or Long term Financial Stability Ratio

•Total Debts to Shareholders Fund

•Long term debt to Shareholders fund

Gearing or Long term Financial Stability Ratio Calculations2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Net profit before interest and tax

36442

25251 24693 19757 9387

Fixed interest paid or payable - - 1120 418 -preference Dividend paid or payble 9302 400 337 293 222

Shareholders fund6168

16237

2 52126 35082 21410

Total Tangible Assets4464

93931

0 38861 27845 17774

Total Debts3487

22070

9 16265 16032 11448

Total Assets9655

38308

1 68391 51114 32858

Fixed Interest Cover - - 22.05 47.27 -

33

a

.¿InterestCover=NetProfitbeforeinterest∧tax

¿interestpaid∨payable

b

.¿DividendCover= NetProfitbeforeinterest∧taxPreferenceDividendpaid∨payable

c

.Proprietaryratio=Shareholdersfund

TotalTangibleAssets

Fixed Dividend Cover 3.9263.1

3 73.27 67.43 42.28Prprietary ratio 1.38 1.59 1.34 1.26 1.20

Debt Ratio 36.12

24.93 23.78 31.37 34.84

Long term debt to Shareholders fund

Appendix D: PROFITABILITY RATIOS

PROFITABILITY RATIOS CALCULATIONS2012 2011 2010 2009 2008GH¢ GH¢ GH¢ GH¢ GH¢

Sales14721

2 10928010377

5 82471 55041Expense 45155 33989 30774 24812 17442Net Profit (before interest andtax) 36442 25251 24693 19757 9387Capital Employed 65345 65196 53861 36412 22218Gross ProfitMargin 52.59 52.50 53.46 53.37 48.04Net Profit Margin 18.48 17.22 18.67 18.38 12.82Expense/Sales 30.67 31.10 29.65 30.09 31.69RROCE 0.56 0.39 0.46 0.54 0.42

34

a.

GrossProfitMargin=GrossProfitSales

∗100b.

NetProfitMargin=NetProfitSales

∗100%c. Expense/Sales=

ExpenseSales

∗100%