SECTION A: COMPULSORY

QUESTION ONE $(40$ Marks$)$

Mason Mount, Inc. Financial Statements

Income Statement for the Year ended January $31$: & Statement of Financial Position as at

January $31$:

$($Kwachas in Thousands$)$

Net Sales

Cost of Sales $2021202020192018$

Gross Profit

Selling, General & Administrative Expenses$($including depreciation$)$

$1,849,100\mathrm{.}00$

$1,434,860\mathrm{.}001,459,430\mathrm{.}00$

Income from Operations

Other Income $($Expenses$)$: Interest and other income

Interest Expense

Income Before Taxes

Income Tax provision

Net Income $245,140\mathrm{.}00$

$14,470\mathrm{.}00$

$(10,180\mathrm{.}00)$

$249,430\mathrm{.}00$

$(102,000\mathrm{.}00)$

$147,430\mathrm{.}00467,180\mathrm{.}00$

$19,510\mathrm{.}00$

$(13,990\mathrm{.}00)$

$472,700\mathrm{.}00$

$(181,990\mathrm{.}00)$

$290,710\mathrm{.}00506,490\mathrm{.}00$

$27,250\mathrm{.}00$

$(12,320\mathrm{.}00)$

$521,420\mathrm{.}00$

$(198,600\mathrm{.}00)$

$322,820\mathrm{.}00382,440\mathrm{.}00$

$14,410\mathrm{.}00$

$(13,750\mathrm{.}00)$

$383,100\mathrm{.}00$

$(162,080\mathrm{.}00)$

$221,020\mathrm{.}00$

$($Kwachas in Thousands$)2021202020192018$

Assets

Current Assets

Cash & Cash Equivalents $272,640\mathrm{.}0082,540\mathrm{.}00321,390\mathrm{.}00281,750\mathrm{.}00$

Receivables $12,090\mathrm{.}003,480\mathrm{.}007,550\mathrm{.}002,740\mathrm{.}00$

Inventory $738,630\mathrm{.}00857,090\mathrm{.}00668,200\mathrm{.}00464,440\mathrm{.}00$

Prepaid Expenses $54,880\mathrm{.}0054,030\mathrm{.}0039,670\mathrm{.}0033,630\mathrm{.}00$

Total Current Assets $997,140\mathrm{.}00782,560\mathrm{.}00$

Property, Plant & Equipment $($at

Cost$)$

Land & Buildings

Fixtures and Fittings

Leasehold Improvements

Construction in Progress

Less Accumulated Depreciation Property, Plant & Equipment, net

Total Assets $531,270\mathrm{.}00$

$476,460\mathrm{.}00$

$16,460\mathrm{.}00$

$(248,430\mathrm{.}00)$

$775,760\mathrm{.}00$

$383,350\mathrm{.}00$

$411,230\mathrm{.}00$

$15,120\mathrm{.}00$

$46,370\mathrm{.}00$

$(183,890\mathrm{.}00)$

$672,180\mathrm{.}00$

$312,670\mathrm{.}00$

$251,920\mathrm{.}00$

$12,340\mathrm{.}00$

$32,800\mathrm{.}00$

$(135,020\mathrm{.}00)$

$474,710\mathrm{.}00$

$151,140\mathrm{.}00$

$219,740\mathrm{.}00$

$9,080\mathrm{.}00$

$6,740\mathrm{.}00$

$(99,470\mathrm{.}00)$

$287,230\mathrm{.}00$

Liabilities and Stockholders' Equity

Current liabilities:

Accounts Payables

Advance Payments on orders Income Taxes Payable

Other Current Obligations $377,970\mathrm{.}00$

$4,460\mathrm{.}00$

$70,800\mathrm{.}00$

$154,510\mathrm{.}00244,150\mathrm{.}00$

$2,030\mathrm{.}00$

$53,020\mathrm{.}00$

$139,950\mathrm{.}00259,040\mathrm{.}00$

$3,500\mathrm{.}00$

$103,970\mathrm{.}00$

$148,790\mathrm{.}00212,223\mathrm{.}00$

$53,940\mathrm{.}00$

$117,900.$oo

Total current liabilities $607,740\mathrm{.}00439,150\mathrm{.}00515,300\mathrm{.}00388,593\mathrm{.}00$

Long$-$Term Debt

Stockholders' Equity Common stock: $78,000\mathrm{.}0084,130\mathrm{.}0076,740\mathrm{.}0086,670\mathrm{.}00$

Shares at par $2,010\mathrm{.}002,010\mathrm{.}002,000\mathrm{.}002,000\mathrm{.}00$

Additional Capital, net $311,360\mathrm{.}00307,810\mathrm{.}00293,080\mathrm{.}00223,080\mathrm{.}00$

Retained Earnings $983,810\mathrm{.}00875,160\mathrm{.}00624,400\mathrm{.}00341,666\mathrm{.}00$

Less Treasury Stock, at Cost $(128,920\mathrm{.}00)(38,940\mathrm{.}00)$

Total Stockholders' Equity $919,480\mathrm{.}00566,746\mathrm{.}00$

Total Liabilities and Equity

Required:

a$)$ Prepare a common size Income Statement for the years and $2021$ and comment on the developments in the major profit indicators. $(15$ Marks$)$ b$)$ Using ratio analysis, Explain the developments in the liquidity of Mason Mount Inc over the

four$-$year period. $(12$ Marks$)$

c$)$ With the aid of DU$-$Pont Analysis, analyze the changes in return on equity from $2018$ to $2021$

$(13$ Marks$)$

SECTION B: ANSWER ANY THREE QUESTIONS

QUESTION TWO $(20$ MARKS$)$

a$)$ Identify and describe the four $(4)$ primary financial statements of a business. $(8$ Marks$)$

b$)$ Explain on the different types of business analysis and highlight the category of users of financial statements that applies to each different type of business analysis. $(12$ Marks$)$

QUESTION THREE $(20$ MARKS$)$

The preparation and analysis of comparative statement of financial position $($balance sheets$)$ and statements of comprehensive income are commonly applied tools of financial statement analysis and interpretation.

a$)$ Discuss the inherent limitations of analyzing and interpreting financial statements for a single year. Include in your discussion the extent that these limitations are overcome by use of comparative financial statements computed over more than one year. $(10$ Marks$)$

b$)$ A year$-$to$-$year analysis of comparative balance sheets and income statements is a useful analysis tool. Still. without proper care, such analysis can be misleading. Discuss factors or conditions that contribute to such a possibility and how additional information and supplementary data

$($beyond financial statements$)$ help prevent this possibility. $(10$ Marks$)$

QUESTION FOUR $(20$ MARKS$)$

Businesses need to be valued for a number of reasons such as their purchase and sale, obtaining a listing, inheritance tax and capital gains tax computations. Generally, valuation difficulties are restricted to unlisted companies because listed companies have a quoted share price. However, even listed companies can present valuation challenges for example when one is trying to predict the effect of a takeover on the share price. Whenever a company is bought what the new owners have a right depends on the stake they hold.

Required; Elaborate on the methods of valuation used to establish the business worthiness and the conditions that must be fulfilled for the methods to operate. $(20$ Marks$)$

QUESTION FIVE $(20$ MARKS$)$

a$)$ Following is selected financial information for eBay Inc., for its fiscal years $2020$ and $2021.$

Kwachas millions, except per share d