Merveille Investments has completed their 2020 financial year which ran from the 1 September 2019. The company sells sanitisers and made a high quantity of sales, N$ 421 000, a 75% increase in sales from the prior year. The company manufactures sanitizers with the use of machinery valued at N$ 300 000, the machinery is carried at FV and the FV at the end of the 2019 year was N$300 000. All operations take place from a factory with a right of use asset of N$ 2 000 000. The asset is amortised over ten years and was initially recognised at the beginning of the prior financial year. The corresponding lease liability for the year is 1900000 it was 1500000 at 31 August 2019. The company was founded in 2018 with share capital of 4 000 000. It was a good investment since the company made profits of 50 000 in the prior and profit for the year increased by 300%. The company does not have a dividend policy, since it has never declared dividends. 

Required: 

a. Compare the company’s performance against the prior year performance Hint: Use Du Pont Analysis 

b. Suggest why the company performance may have changed from one year to the next.

Answer rating: 100% (QA)

Based on the ROE the performance of the Company is better in 2019 ROE increased from 001 in 2018 to ... View the full answer