P4 ACCA Workbook Q & A PDF
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P4 ACCA Questions & Solutions www.mapitaccountancy.com! P4 ACCA Workbook Questions & Solutions P4 ACCA Questions & Solutions www.mapitaccountancy.com! Lecture 1 Financial Strategy P4 ACCA Questions & Solutions www.mapitaccountancy.com! Shareholder Wealth - Illustration 1 Year Share Price Dividend Paid 2007 3.30 40c 2008 3.56 42c 2009 3.47 44c 2010 3.75 46c 2011 3.99 48c There are 2 million shares in issue. ! ! ! ! ! ! ! ! ! ! ! ! Calculate the increase in shareholder wealth for each year: II. Per share III. As a percentage IV. For the business as a whole Solution Year Share Share Price Div Increase As a Total Price Growth Paid in Percentage Shareholder S’holder Return Wealth 2007 3.30 40c 2008 3.56 (3.56 - 3.30) = 26c 42c (26 + 42) = (68 / 330) = 2m x 68c = 68c 20.6% $1.36m 2009 3.47 (3.47 - 3.56) = -9c 44c (-9 + 44) = (35 / 356) = 2m x 35c = 35c 9.8% $0.70m 2010 3.75 (3.75 - 3.47) = 28c 46c (28 + 46) = (74 / 347) = 2m x 74c = 74c 21.3% $1.48m 2011 3.99 (3.99 - 3.75) = 24c 48c (24 + 48) = (72 / 375) = 2m x 72c = 72c 19.2% $1.44m P4 ACCA Questions & Solutions www.mapitaccountancy.com! EPS - Illustration 2 2010 2011 $‘000 $‘000 PBIT 2000 2100 Interest 200 300 Tax 300 400 Profit After Tax 1500 1400 Preference Dividend 300 400 Dividend 800 900 Retained Earnings 400 100 Share Capital (50c) 5000 5000 Reserves 3000 3100 Share Price $2.50 $2.80 Calculate the EPS for 2010 and 2011. Solution 2010 2011 Profit After Tax 1500 1400 Preference Dividend 300 400 Earnings 1200 1000 No. Ordinary Shares (5000 / 0.50) 10,000 10,000 EPS (Earnings / No. Ordinary Shares) 12c 10c P4 ACCA Questions & Solutions www.mapitaccountancy.com! Lecture 2 Performance Measurement P4 ACCA Questions & Solutions www.mapitaccountancy.com! Performance Analysis Illustration X1 X2 X3 Non Current Assets 500 700 1000 Current Assets 150 200 300 650 900 1300 Ordinary Shares ($1) 300 300 300 Reserves 100 280 430 Loan Notes 150 200 300 Payables 100 120 270 650 900 1300 Revenue 3000 3500 4200 COS 2000 2400 3200 Gross Profit 1000 1100 1000 Admin Costs 300 350 400 Distribution Costs 200 250 300 PBIT 500 500 300 Interest 100 150 220 Tax 120 90 50 Profit After Tax 280 260 30 Dividends 100 110 30 Retained Earnings 180 150 0 Share Price $3.30 $4.00 $2.20 Using the information calculate and comment on the following Ratios: I. Return on Capital Employed II. Return on Equity III. Gross Margin IV. Net Margin V. Operating Margin VI. Revenue Growth VII. Gearing VIII.Interest Cover IX. Dividend Cover X. Dividend Yield XI. P/E Ratio P4 ACCA Questions & Solutions www.mapitaccountancy.com! Solution ROCE X1 X2 X3 Equity + LT Shares 300 300 300 Liabilities Reserves 100 280 430 LT Loan Notes 150 200 300 Capital Employed 550 780 1030 Non Current Assets Non Current Assets 500 700 1000 + Net Current Assets Net Current Assets (150 - 100) = 50 (200 - 120) = 80 (300 - 270) = 30 (Current Assets - Current Liabilities) Capital Employed 550 780 1030 Total Assets - Total Assets 650 900 1300 Current Liabilities Current Liabilities 100 120 270 Capital Employed 550 780 1030 PBIT 500 500 300 Return on Capital PBIT / Capital (500 / 550) = (500 / 780) = (300 / 1030) = Employed Employed 90.91% 64.10% 29.13% P4 ACCA Questions & Solutions www.mapitaccountancy.com! X1 X2 X3 Return on Capital Employed (ROCE) 90.91% 64.10% 29.13% IIIInnnn tttthhhheeee fifififirrrrsssstttt yyyyeeeeaaaarrrr tttthhhheeee RRRROOOOCCCCEEEE wwwwaaaassss 99990000....99991111%%%%.... AAAAtttt fifififirrrrsssstttt ggggllllaaaannnncccceeee tttthhhhiiiissss wwwwoooouuuulllldddd aaaappppppppeeeeaaaarrrr ttttoooo bbbbeeee aaaa ggggoooooooodddd rrrreeeettttuuuurrrrnnnn,,,, hhhhoooowwwweeeevvvveeeerrrr wwwwiiiitttthhhhoooouuuutttt iiiinnnndddduuuussssttttrrrryyyy aaaavvvveeeerrrraaaaggggeeeessss oooorrrr pppprrrriiiioooorrrr ppppeeeerrrriiiioooodddd iiiinnnnffffoooorrrrmmmmaaaattttiiiioooonnnn wwwweeee aaaarrrreeee uuuunnnnaaaabbbblllleeee ttttoooo tttteeeellllllll iiiiffff tttthhhhiiiissss iiiissss tttthhhheeee ccccaaaasssseeee.... IIIInnnn yyyyeeeeaaaarrrr XXXX2222 tttthhhheeee RRRROOOOCCCCEEEE iiiissss 66664444....11110000%%%%.... 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TTTThhhhiiiissss iiiissss aaaa ffffaaaallllllll ooooffff 55554444....55555555%%%% iiiinnnnddddiiiiccccaaaattttiiiinnnngggg tttthhhhaaaatttt tttthhhheeeerrrreeee mmmmaaaayyyy bbbbeeee ssssoooommmmeeee sssseeeerrrriiiioooouuuussss uuuunnnnddddeeeerrrrllllyyyyiiiinnnngggg pppprrrroooobbbblllleeeemmmmssss wwwwhhhhiiiicccchhhh aaaarrrreeee aaaaffffffffeeeeccccttttiiiinnnngggg tttthhhheeee aaaabbbbiiiilllliiiittttyyyy ooooffff tttthhhheeee bbbbuuuussssiiiinnnneeeessssssss ttttoooo ggggeeeennnneeeerrrraaaatttteeee tttthhhheeee rrrreeeettttuuuurrrrnnnn oooonnnn ccccaaaappppiiiittttaaaallll pppprrrreeeevvvviiiioooouuuussssllllyyyy ggggeeeennnneeeerrrraaaatttteeeedddd.... ROE X1 X2 X3 Profit After Tax 280 260 300 Ordinary Shares 300 300 300 Reserves 100 280 430 Total 400 580 730 Return on Equity (PAT / Ord Shares + (280 / 400) = (260 / 580) = (300 / 730) = Reserves) 70% 44.8% 41% IIIInnnn tttthhhheeee fifififirrrrsssstttt yyyyeeeeaaaarrrr tttthhhheeee RRRROOOOEEEE wwwwaaaassss 77770000%%%%.... 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Margins X1 X2 X3 Revenue 3000 3500 4200 Gross Profit 1000 1100 1000 PAT 280 260 30 PBIT 500 500 300 Gross Margin (Gross Profit / Revenue) (1000 / 3000) = (1100 / 3500) = (1000 / 4200) = 33.33% 31.42% 23.89% Net Margin (PAT / Revenue) (280 / 3000) = (260 / 3500) = (30 / 4200) = 9.3% 7.4% 0.7% Operating Margin (PBIT / Revenue) (500 / 3000) = (500 / 3500) = (300 / 4200) = 16.66% 14.28% 7.1% TTTThhhheeee GGGGrrrroooossssssss MMMMaaaarrrrggggiiiinnnn iiiissss 33333333....33333333%%%% iiiinnnn XXXX1111 aaaannnndddd hhhhoooollllddddssss rrrreeeeaaaassssoooonnnnaaaabbbbllllyyyy sssstttteeeeaaaaddddyyyy iiiinnnn XXXX2222 aaaatttt 33331111....44442222%%%%.... 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Gearing X1 X2 X3 Debt 150 200 300 Equity Number of 300 300 300 Shares Share Price 3.30 4 2.20 Market Value (300 x 3.30) = (300 x 4) = (300 x 2.20) = 990 1200 660 Gearing (Debt / Equity) (150 / 990) = (200 / 1200) = (300 / 660) = 15% 16.66% 45.45% GGGGGeeeeeaaaaarrrrriiiiinnnnnggggg llllleeeeevvvvveeeeelllllsssss iiiiinnnnn yyyyyeeeeeaaaaarrrrr XXXXX11111 aaaaarrrrreeeee 1111155555%%%%%..... WWWWWiiiiittttthhhhhooooouuuuuttttt iiiiinnnnnddddduuuuussssstttttrrrrryyyyy aaaaavvvvveeeeerrrrraaaaagggggeeeeesssss ooooorrrrr ppppprrrrriiiiiooooorrrrr yyyyyeeeeeaaaaarrrrr dddddaaaaatttttaaaaa wwwwweeeee aaaaarrrrreeeee uuuuunnnnnaaaaabbbbbllllleeeee tttttooooo aaaaasssssssssseeeeessssssssss ttttthhhhhiiiiisssss llllleeeeevvvvveeeeelllll aaaaalllllttttthhhhhooooouuuuuggggghhhhh aaaaattttt fififififirrrrrsssssttttt ggggglllllaaaaannnnnccccceeeee iiiiittttt dddddoooooeeeeesssss nnnnnooooottttt ssssseeeeeeeeeemmmmm eeeeexxxxxccccceeeeessssssssssiiiiivvvvveeeee..... 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