Business Accounting
Question 1. Ratio analysis (30 marks)
Analyze the financial statements of these two companies in the year prior to the transaction, and the consolidated financial statements 1 year and 3 years after consolidation using:
(a) Calculation of ratios:
(i) 3 Profitability and solvency (liquidity) ratios.
(ii) 2 Efficiency ratios
(iii) 3 Shareholder ratios
(iv) 3 Capital structure ratio
Critically interpret and discuss the ratios in point (i) to (iv) above 1 year before and 3 years after the takeover and merger transactions. Besides your qualitative explanations, use figures, tables and graphs to present your data.
Compare the ratios of consolidated financial statements with two of the main competitors of the firm within the same industry and also with those of the industry.
Would you invest in the company after the transaction? Why or why not?
How does the company compare to its competitors and the industry?
Identify the above elements in a statement of financial position from your case study company and provide the excerpt where they are specifically shown (a print screen supported by reference is sufficient). Where any of them is not clear or explicitly
Calculate the good will that has been explicitly explained or has implicitly been paid in the transaction (State your assumptions). Elaborate on the acquiring company’s (explicit or implicit) argumentation on the determined goodwill.
Describe the various types of shares which the company issued to raise capital.
Explain the accounting treatment of the shares issue if the issued shares are undersubscribed due to the current impact of COVID-19 pandemic affecting many economies across the world. How will this affect the company’s shareholders?
How will this be different if you advice on the issue of a convertible debenture on the company’s capital structure and the shareholders?
What is your comment on your case study company’s equity capital when you compare its two consecutive financial years
