Grade 12 · CAPS

Grade 12 Analysis and Interpretation of Financial Statements

Accounting practice questions and a worked example

Grade 12 analysis and interpretation of financial statements is about calculating financial indicators and using them to judge a company. The questions here ask you to calculate indicators such as net asset value per share, the dividend pay-out rate, the acid-test ratio and the return on average shareholders' equity, and then to comment on liquidity, gearing and risk, earnings and returns, dividends and the share price, quoting figures and trends. They come from the NSC Paper 1 for November 2023, 2024 and 2025, each with the answer from the marking guideline.

Worked example

QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION GUARDIAN LTD AND NAVARRA LTD The information relates to TWO companies. 3.2 Liquidity: Identify the company that is managing its working capital well. Quote TWO financial indicators.

Answer

Guardian Ltd. • Current ratio: increased (from 1,5 : 1) to 1,7 : 1 / by 0,2 : 1. • Acid-test ratio: increased (from 1,0 : 1) to 1,2 : 1 / by 0,2 : 1. • Debtors' collection period: decreased (from 22 days) to 19 days / by 3 days. • Creditors' payment period: increased (from 48 days) to 50 days / by 2 days.

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Analysis and Interpretation of Financial Statements

Question 1 of 3

QUESTION 2: CASH FLOW STATEMENT AND FINANCIAL INDICATORS The information relates to Sherbiz Ltd for the financial year ended 28 February 2023. 2.3 Calculate the following financial indicators: (a) Net asset value per share

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Common mistakes

Commenting without figures. The marking guideline gives marks for the indicator, the figures and the trend, for example 'the debt-equity ratio improved from 0,5 : 1 to 0,2 : 1'.
Using the closing balance where the formula needs an average. The return on average shareholders' equity uses the average of the opening and closing equity.
Mixing up risk and gearing. The debt-equity ratio shows the financial risk; gearing is positive when the return on average capital employed is higher than the interest rate on loans.

Analysis and Interpretation of Financial Statements in other grades

Grade 11 Analysis and Interpretation of Financial Statements

Aligned to CAPS Grade 12 Accounting — Analysis and Interpretation of Financial Statements. Curriculum source: CAPS for the FET Phase, Department of Basic Education.