Page 15 - CIMA SCS Workbook February 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

Chapter Six – F3

EXERCISE 1

Workings

N$ 000 2018 2017
Capital Non-current 22,766 + 593,542 19,861 + 527,186 547,047
employed liabilities + 570,776
Equity
Return on (Operating (54,259 / 9.1% (153,550 / 28.1%
Capital profit / Capital 593,542) 547,047) x100%
Employed Employed) x x100%
(ROCE) 100%
Asset Revenue / 4,006,768 / 6.8 times 3,588,843 / 6.6 times
turnover Capital 593,542 547,047
Employed
Operating (Operating (54,259 / 1.4% (153,550 / 4.3%
profit (%) profit / 4,006,768) 3,588,843) x100%
Revenue) x x100%
100%
Gross profit (Gross profit / (1,528,750 / 38.2% (1,172,781 / 32.7%
(%) Revenue) x 4,006,768) 3,588,843) x100%
100% x100%
Return on (Profit for the (43,590 / 7.6% (125,322 / 23.8%
equity (ROE) year / Equity) 570,776) 527,186) x100%
x 100% x100%
2011 2012 2013 2014 2015 2016 2017 2018

Revenue 22 47 237 1,021 2,261 2,989 3,589 4,007
(N$m)
Unit sales 0.55 1.2 3.3 7.1 13.1 17.3 20.1 22
(m)
Average 40 39 72 144 173 173 179 182
selling price
per item sold
(N$)

Commentary

Return on Capital Employed (ROCE)

ROCE has reduced from 28.1% in 2017 to 9.1% in 2018. This is a dramatic fall.

Capital employed grew by 8.5%, but the operating profit fell by 64.7% (from N$ 153.550 million to
N$ 54.259 million).

KAPLAN PUBLISHING 55