QUESTION 2 (20 MARKS) The Wallbeans Group is a conglomerate of several small companies, all of which specialize in the m

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QUESTION 2 (20 MARKS)
The Wallbeans Group is a conglomerate of several smallcompanies, all of which specialize in the manufacture and sale of awide range of popular processed foods. The company’s shares havebeen trading steadily on the Johannesburg Stock Exchange for thepast few years. As a result, a prospective investor has hired youas a financial consultant to provide an expert opinion on whetherthey should go ahead with the investment. You believe that a goodstarting point would be an analysis of the company’s financialstatements using ratio analyses. The consolidated Statement ofComprehensive Income and Statement of Financial Position of thegroup for the year ending 29 February 2020 are given below:
Statement of Comprehensive Income for the year ending 29February2020
2020 Rm 2019 Rm Continuing operations Sales revenue 2 526.3 2066.9 Profit (earnings) before interest and tax 310.9 242.2 Financecosts (21.3) (18.5) 289.6 223.7 Income from investments 8.7 7.7Share of profits of associates 0.0 0.1 Profit before tax 298.3231.5 Income tax expense (109.5) (86.9) Profit for the year fromcontinuing operations 188.8 144.6 Discontinued operations Loss fromdiscontinued operations 48.6 0.0 Profit for the year 140.2 144.6Other comprehensive income - - Total comprehensive income 140.2144.6 Total comprehensive income attributable to: Owners of thecompany 104.7 109.9 Non-controlling interests 35.4 34.6 Preferenceshareholders 0.1 0.1 140.2 144.6
Statement of Financial Position as at 28 February 2020
2020 Rm 2019 Rm ASSETS Non-current assets Property, plant andequipment 683.1 594.2 Investments 4.1 4.6 687.2 598.8 Currentassets Inventories 489.6 381.3 Receivables 361. 278.0 Holding andfellow subsidiaries 13.9 6.3 Cash assets 16.9 60.5 Total currentassets 881.7 726.1 Total assets 1 568.9 1 324.9
EQUITIES AND LIABILITIES Equity Share capital 271.7 202.9Retained earnings 341.7 296.7 613.4 685.4 Preference shares 1.0 1.0Minority interest 37.3 184.8 Total equity 651.7 685.4 Non-currentliabilities Long-term borrowings 163.3 83.2 Deferred tax 99.5 101.7Total non-current liabilities 262.8 184.9 Current liabilities Tradeand other payables 427.7 315.8 Shareholders for dividends 37.0 25.2Current tax payable 91.9 75.9 Holding and fellow subsidiaries 11.51.7 Short-term borrowings 86.3 37.0 Total current liabilities 654.4455.6 Total Equity and Liabilities 1 568.9 1 325.9 Assume thatthere are 365 days in a year Required: a) Using the followingratios,. i. Inventory turnover (2 marks) ii. Average collectionperiod (2 marks) iii. Total asset turnover (2 marks) iv. Debt ratio(2 marks) v. Times interest earned (2 marks) vi. Operating profitmargin (2 marks) vii. Return on total assets (2 marks) b) Based onyour answers calculated in (a) above, comment on the group’s debtposition, its asset management performance, and its profitabilityperformance in 2020 as compared to 2019. (6 marks)