A friend is looking for advice on one of his investments, KER. KER manufactures stationery supplies, the entity appointed a new Chairman in 2008 and since then has been executed an expansion strategy aimed at pursuing new markets with its active product base.
In the 2009 annual report The Chairman's report included and announces the success of the expansion plan, citing increased returns and profits as evidence of the entity's success, and noting that the entity has invested in non-current assets to ensure returns continues to increase. Your friend is intending to hold his investment in KER based on the positive chairman's report but has asked you to consider the monetary information to assess whether the figures support the chairman's claims.
The statement of financial position as at 31 December 2009 and its comparative is shown below:
|
2009
|
2008
|
|
$m
|
$m
|
|
ASSETS
|
|
Non-current assets
|
|
Property, plant and equipment
|
480
|
404
|
|
Investment in associate
|
177
|
-
|
|
Available for sale investments
|
150
|
140
|
|
807
|
544
|
|
Current assets
|
|
Inventories
|
145
|
65
|
|
Receivables
|
247
|
134
|
|
Cash and cash equivalents
|
-
|
22
|
|
392
|
221
|
|
Total assets
|
1,199
|
765
|
|
EQUITY AND LIABILITIES
|
|
Equity
|
|
Share capital
|
100
|
100
|
|
Revaluation reserve
|
74
|
32
|
|
Other reserves
|
32
|
22
|
|
Retained earnings
|
457
|
333
|
|
Total equity
|
663
|
487
|
|
Non-current liabilities
|
|
Loans
|
400
|
210
|
|
Current liabilities
|
|
Payables
|
99
|
68
|
|
Overdraft
|
37
|
-
|
|
136
|
68
|
|
Total liabilities
|
536
|
278
|
|
Total equity and liabilities
|
1,199
|
765
|