Question

Question 1                                                                                                         25 Marks

Study the following comparative profit and loss and financial position statements for Phoenix Energy for the years 2013 and 2014. The current market price for Phoenix Energy is OMR 0.420

Instructions:

Based on the information provided,

Examine the following ratios for the years 2015 and 2016.                      20 marks

Earnings per share.          

Inventory turnover.

Total assets turnover.       

Times interest earned.         

Operating profit margin.

Critically evaluate the profitability and the efficiency of the company over the two-year period.                                                                                                 5 marks                                                                                                                                                                

Phoenix Energy
Statement of Profit and Loss
Year ended 31 December 2016
	2016		2015
OMR		OMR
Revenue	22,159,815		17,282,950
Cost of sales	(17,181,335)		(13,550,554)
Gross profit	4,978,480		3,732,396
Other income	152,525		58,700
Selling, administrative and general expenses	(3,145,672)		(2,199,778)
Profit from operations	1,985,333		1,591,318
Finance income	64,671		104,763
Gain on investments at fair value through profit or loss	516,748		190,164
Finance cost	(282,320)		(266,794)
Profit for the year before taxation	2,284,432		1,619,451
Taxation	(332,657)		(312,233)
Profit and total comprehensive income for the	1,951,775		1,307,218

Phoenix Energy
Statement of Financial Position
At 31 December 2016
	2016		2015
Assets	OMR		OMR
Non-current assets
Property, plant and equipment	10,115,906		9,747,995
Technology transfer fee	602,321		424,739
Deposit with leasing and finance companies	500,000		-
Deferred tax asset	64,903		70,216
Total non-current assets	11,283,130		10,242,950
Current assets
Inventories	5,278,004		5,724,791
Trade and other receivables	5,148,595		5,569,284
Investments at fair value through profit and loss	1,973,496		2,481,785
Amount due from related parties	19,781		37,500
Deposit with leasing and finance companies	-		1,000,000
Bank deposits	200,000		200,000
Cash in hand and at banks	1,085,824		154,486
Total current assets	13,705,700		15,167,846
Total assets	24,988,830		25,410,796
Equity and liabilities
Equity
Share capital	6,050,000		6,050,000
Share premium	5,236,345		5,236,345
Share-based payments reserve	167,700		-
Legal reserve	1,984,082		1,763,819
Retained earnings	2,684,838		2,163,326
Total equity	16,122,965		15,213,490
Liabilities
Non-current liabilities
Long term loans	3,520,478		4,499,679
Deferred government grant	37,037		52,787
End of service benefits	275,847		229,184
Total non-current liabilities	3,833,362		4,781,650
Current liabilities
Trade and other payables	3,648,635		4,142,737
Bank borrowings	125,766		405,862
Amount due to related parties	9,182		25,934
Current portion of term loans	1,248,920		841,123
Total current liabilities	5,032,503		5,415,656
Total liabilities	8,865,865		10,197,306
Total equity and liabilities	24,988,830		25,410,796
Net assets per share	0.266		0.251

Answer 1

earning after tax	1951775	1307218
No, of shares	605000	605000
EPS	3.23	2.16
Inventory turnover	3.26	2.37
Cost of sales	17181335	13550554
Inventory	5278004	5724791
Total asset turnover	0.89	0.68
sales	22159815	17282950
Assets	24988830	25410796
Times interest earned	0.14	0.17
Interest	282320	266794
EBIT	1985333	1591318

Notes:

1. The EPS is better in 2016 as the earning has increased . The number of shares is not given and so we are taking the per share amount is OMR 10

2. There is alittle difference in the turnaround as in 2016 the comapny has greater earning

3. the Interest is covered faster as we made better profits than 2015 and hence the finance cost is covered at a better pace.

4. oPERATING MARGIN itself says that in 2016 we had icreased ur profits when compared to 2015, however there is no huge change, but the sales have shown a great increase in the sales.