ICAN CASE STUDY PILOT 1: DELWARE NIGERIA LIMITED

DATE CANDIDATE NO.

TIME MARKER NUMBER

Exc Sum Req 1 Req 2 Overall TOTAL

SA
CA
BC
NC
V
Total 5 8 8 4 25

SUPERVISOR CHECKER
SIGNATURE SIGNATURE

Changes made? c
EXECUTIVE SUMMARY: Delware Nigeria Limited

General 4. Requirement 2: Conclusions

w States the purpose of the report w Both businesses will result in additional revenue.

w States the summary of the two requirements w Both businesses will increse DEWL's net profit

w States the assumptions w With sheravile, DEWL will meet its strategic objectives.

w States reservations, e. g. scepticism

w w Both businesses are worthwhile but Sheravile is better.

w w

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2. Requirement 1: Conclusions 5. Requirement 2: Recommendations

w Revenue is growing. w Concentrate efforts on sheravile.

w Gross margin is stable. wExplore possibility of increasing retail customers
w Overheads are growing thus eroding profit.
w Returns on capital employed decreasing rapidly. w Explore possibility of increasing hospitality customer
w base.
w
V NC BC CA SA w V NC BC CA SA

3. Requirement 1: Recommendations
w Control costs to bring down overheads.
w
w Expand hospitality customer base.
w Seek to vary agreement of sole distributorship
with DNL, so as to be able to appoint more
distributors.
w Review terms of doing business with long
distance customers

V NC BC CA SA V NC BC CA SA
ditional revenue.

L's net profit

s strategic objectives.

but Sheravile is better.

A SA

tail customers

hospitality customer

A SA
A SA
 REQUIREMENT 1 - Delware Nigeria Limited's financial statement ana

USES DATA AND INFORMATION APPROPRIATELY IDENTIFIES ISSUES AND OPTIONS

w Uses information on exhibit 4 and 12 - income statements to show w Identifies that DEWL's revenue has been grow
trend of DEWL operating performance.

w Uses information in exhibit 4 and 12 - statement of financial w Identifies the DEWL's costs and overheads ha
position to calculate the various ratios. thereby erroding the profit margin

w Uses information on exhibit 4 and 12 - notes to management w Identifies that contribution margin from hospita
accounts to show trend in performance of each revenue stream. been going down more rapidly.

w Identifies that gross profit margin remained at

w Uses information in exhibit 13 to show the effects of the in 2018 and 2019.
provision on Kano Trader's on DEWL's performance.
w Identifies that adjustments for Kano Traders h
w Uses information on exhibit 6 to evaluate DEWL's performance effect on DEWL's performance.
compared to its financial objectives.

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USES PROFESSIONAL TOOLS AND KNOWLEDGE APPLIES PROFESSIONAL SCEPTICISM AN

w Calculates gross margin ratios w Recognises the threat that the continous inrea
overheads pose on the profitability of DEWL.
w Calculates profitability per revenue streams
w Recognises that DEWL has not been meeting
w Calculates net profit margin. strategic financial objectives.

w Recognises that retunrns on capital employed

w Prepares trend analysis to determine growth in performance from 32.3% in 2017 to 14.7% in 2019.
of DEWL
w Recognises that net profit margin has gone do
w Calculate ratios of expenses to revenue from 9.3% in 2017 to 4.1% in 2019.

Calculates figures to show the effect of adjustments for Kano w

Traders on DEWL's performance.

w Shows the variances between DEWL's actual performance and

its strategic plan's financial objectives.

-
V NC BC CA SA V

USES ANALYTICAL SKILLS (material points) written report EVALUATIVE SKILLS AND JUDGEMENT

w Determines trend in DEWL's revenue. w Identifies that DEWL's revenue have been inc
 to year.

w Determines trend in DEWL's gross margin w Identifies that rate of cost of sales to revenue
been increasing.

w Determines trend in DEWL's expenses to revenue w Identifies that DEWL's gross margin has rema

w Determines trend in performance of each revenue stream. w Identifies that DEWL's rate of expenses to rev
been increasing.
w Determines trend in return of capital employed.

Identifies that return on capital employed has

yearly.

V NC BC CA SA V
imited's financial statement analysis.

IDENTIFIES ISSUES AND OPTIONS CONCLUSIONS

Identifies that DEWL's revenue has been growing steadily.
Identifies the DEWL's costs and overheads have been growing
thereby erroding the profit margin
(Draws distinct conclusions under a heading)
w Concludes that DEWL management should stem the
tide of continuous increase in overheads.
w Concludes that DEWL's revenue is growing steadily year on

Identifies that contribution margin from hospitality business has . w Concludes that gross margin appeared relativley stable
been going down more rapidly.

Identifies that gross profit margin remained at the same level w Concludes that returns on capital employed has been
in 2018 and 2019. dropping, partly because of investment on non-current asse

Identifies that adjustments for Kano Traders has a minimal w

effect on DEWL's performance.

NC BC CA SA V

APPLIES PROFESSIONAL SCEPTICISM AND ETHICS RECOMMENDATIONS (commercial / relevant)

Recognises the threat that the continous inrease in costs and
overheads pose on the profitability of DEWL.
Recognises that DEWL has not been meeting its planned
strategic financial objectives.
Recognises that retunrns on capital employed has gone down
from 32.3% in 2017 to 14.7% in 2019.
Recognises that net profit margin has gone down
from 9.3% in 2017 to 4.1% in 2019.
w Recommends that DEWL's management should take immed
step to arrest the continous increase in costs and overhead
w Recommends that DEWL's management should make effor
to expand its hospitality customers.
w Recommends that DEWL should review its sole distributorsh
agreement with DNL, with a view to appointing more
distributors in strategic locations in the country to boost sale
revenue.
w Recommends that DEWL should be more careful when dea
with customers from long distance to ensure that issues like
that of Kano Traders never occur again in future.
w

NC BC CA SA V

EVALUATIVE SKILLS AND JUDGEMENT

Identifies that DEWL's revenue have been increasing from year

to year.

Identifies that rate of cost of sales to revenue has

been increasing.

Identifies that DEWL's gross margin has remained stable.

Identifies that DEWL's rate of expenses to revenue have

been increasing.

Identifies that return on capital employed has dropping

NC BC CA SA
CONCLUSIONS
(Draws distinct conclusions under a heading)

Concludes that DEWL management should stem the

tide of continuous increase in overheads.

Concludes that DEWL's revenue is growing steadily year on year.

Concludes that gross margin appeared relativley stable

Concludes that returns on capital employed has been

dropping, partly because of investment on non-current assets.

NC BC CA SA

RECOMMENDATIONS (commercial / relevant)

Recommends that DEWL's management should take immediate

step to arrest the continous increase in costs and overheads.
Recommends that DEWL's management should make efforts
to expand its hospitality customers.

Recommends that DEWL should review its sole distributorship

agreement with DNL, with a view to appointing more
distributors in strategic locations in the country to boost sales
revenue.
Recommends that DEWL should be more careful when dealing
with customers from long distance to ensure that issues like
that of Kano Traders never occur again in future.

NC BC CA SA
 REQUIREMENT 2 -Appraisal of new business proposals

USES DATA AND INFORMATION APPROPRIATELY IDENTIFIES ISSUES AND OPTIONS

w Uses information in exhibit 5 to determine additional revenue w Identfies that concentrating on Sheravile business
from Spicey. Spicey business.

w Uses additional information in exhibit 16 to determine w Identifies that concentrating on Sheravile busines
additional revenue from Spicey. meeting its strategic financial objectives.

w Uses information in exhibit 10 to project income statement w Identifies that Sheravile business will results in gre
from 2020 to 2021. business.

w Uses information in exhibit 15 to determine additional w Identifies that both sheravile and Spicey business
revenue fro Sheravile.

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USES PROFESSIONAL TOOLS AND KNOWLEDGE APPLYING PROFESSIONAL SCEPTICISM AND

(written into report)
w Determinesthe additional revenue from Spicey business.
w Determines the additional revenue from Sheravile business.
w Queries the veracity of the statement that the vas
restaurants have experienced problems with table
whereas, the press article only indicated 25%.
w Queries DEWL's management decision not to sep
from coated ones when offering them to Spicey.

w Determines the projected income statement for the 2020 and w Queries the reliability of the various estimates in b
2021 businesses.

w Determines how Spicey business will increase DEWL's total w Express doubt about the estimated revenue and c
revenue. two years.

w Determines how Sheravile business will increase DEWL's total w

revenue.
Determines which of the two businesses will help DEWL w
to meet its strategic financial objectives.
-
V NC BC CA SA V

USESG ANALYTICAL SKILLS (material points) EVALUATIVE SKILLS AND JUDGEMENT

(uses analytical headings)
w Calculates total yearly revenue from Sheravile. w Evaluates the Sheravile business
w Calculates total yearly revenue from Spicey.
w Evaluates the Spicey business

w Calculates the effect of Sheravile business on the projected w Shows the projected income statement for the nex
income statement for the next two years

w Calculates the effect of Spicey business on the projected w Shows the effects of Sheravile business on the pr
income statement for the next two years the next two years.

w Shows calculation to show whether DEWL will meet its strategic w Shows the effects of Spicey business on the proje
financial objectives with Sheravile business. the next two years.
w Shows which of the two businesses will hepl DEW
w Shows calculation to show whether DEWL will meet its strategic financial objectives.
financial objectives with Spicey business.
V NC BC CA SA V
usiness proposals

IDENTIFIES ISSUES AND OPTIONS CONCLUSIONS

(Draws distinct conclusions under a headi
Identfies that concentrating on Sheravile business is better than concentrating on w Concludes that Sheravile business will res
Spicey business. revenue and profit

Identifies that concentrating on Sheravile business will assist the company in w Concludes that Spicey business will result
meeting its strategic financial objectives. revenue and profit.

Identifies that Sheravile business will results in greater revenue than the Spicey w Concludes that Sheravile business will ass
business. its strtegic financial objectives.

Identifies that both sheravile and Spicey businesses will increase DEWL's revenue. w Concludes that both businesses are good

NC BC CA SA V

APPLYING PROFESSIONAL SCEPTICISM AND ETHICS RECOMMENDATIONS (commercial / rel

Queries the veracity of the statement that the vast majority of dinners at highbrow w Recommends that DEWL's management
restaurants have experienced problems with tableware in the past 12 months its effort on Sheravile business in the curre
whereas, the press article only indicated 25%.
Queries DEWL's management decision not to separate the uncoated kitchenware w Recommends that DEWL should continue
from coated ones when offering them to Spicey. Spicey as it has been in its current operati

Queries the reliability of the various estimates in both the Sheravile and Spicey w Recommends that DEWL should explore p
businesses. increasing its retail customers.

Express doubt about the estimated revenue and cost projection in the next w Recommends that DEWL should improve
two years. business trusts.

NC BC CA SA V

EVALUATIVE SKILLS AND JUDGEMENT

(uses analytical headings)
Evaluates the Sheravile business
Evaluates the Spicey business

Shows the projected income statement for the next two yers.

Shows the effects of Sheravile business on the projected income statement for
the next two years.

Shows the effects of Spicey business on the projected income statement for
the next two years.
Shows which of the two businesses will hepl DEWL meets its strategic
financial objectives.

NC BC CA SA
CONCLUSIONS
(Draws distinct conclusions under a heading)
Concludes that Sheravile business will results in additional
revenue and profit
.
Concludes that Spicey business will result in additional
revenue and profit.

Concludes that Sheravile business will assist DEWL meets

its strtegic financial objectives.

Concludes that both businesses are good businesses.

NC BC CA SA

RECOMMENDATIONS (commercial / relevant)

Recommends that DEWL's management should concentrate

its effort on Sheravile business in the current year.

Recommends that DEWL should continue to accommodate

Spicey as it has been in its current operations.

Recommends that DEWL should explore possibility of

increasing its retail customers.

Recommends that DEWL should improve on its

business trusts.

NC BC CA SA
 Appendices

Appendices R1: Content and style Report: Structure

w Shows trend of DEWL''s operating perfomance-income w Sufficient appropriate headings

statement.

w Shows trend in performance by revenue streams w Appropriate use of paragraphs / sent

w Shows appropriate performance ratios

w Legible/clear hand writing
w Show with appropriate calculayion the effect of
adjustment of Kano Traders' transaction.
w Showstrend in operating expenses to revenue ratios. w Correctly numbered pages

w Shows return on capital employed

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Appendices R2: Content and style Report: Style and language

w Shows calculation of additional revenue from Sheravile. w Relevant disclaimer (external report)

w Shows calculation of additional revenue from Spicey.

w Suitable language for the board
w Shows projected income statement for 2020 and 2021..

w Shows the effect of Sheravile business on projected income statement w Tactful / ethical comments

w Shows the effect of Spicey business on projected income statement

its strategic
w financial objectives. w Acceptable spelling and punctuation

w Shows which of the two businesses will assist DEWL meets its
strategic financial objectives.

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 Main Report

Report: Structure

Sufficient appropriate headings

Appropriate use of paragraphs / sentences

Legible/clear hand writing

Correctly numbered pages

NC BC CA SA

Report: Style and language

Relevant disclaimer (external report)

Suitable language for the board

Tactful / ethical comments

Acceptable spelling and punctuation

NC BC CA SA
Appendice 1
Financial statement analysis
Delware Exotic Wares Nigeria Limited 2017 2018 CHANGE
₦m ₦m ₦m
Revenue 1,968 2,490 522
Manufacturing costs -1,045 -1,494 -449
Gross profit 923 996 73
Distribution expenses -154 -186 -32
Selling espenses -414 -459 -45
Administrative expenses -166 -174 -8
Operating profit 189 177 -12
Finance expenses -6 -3 3
Net profit before tax expenses 183 174 -9

Revenue - Retail 616 785 169

Manufacturing costs -404 -514 -110
Distribution expenses -32 -122 -90
Selling expenses -71 -343 -272
Contribution to profit 109 -194 -303
Contribution margin margin 17.69 -24.71 -42.41

Revenue - Hospitality 1,352 1,705 353

Manufacturing costs -641 -980 151
Distribution expenses -122 -149 58
Selling expenses -343 -374 59
Contribution to profit 246 202 - 44.0
Contribution margin margin 18.20 11.85 - 6.35

Ratios 2017 2018 2019

Gross Profit margin 923/1968% 996/2490% 1133/2832%
46.9% 40.0% 40.0%
Manufacturing costs to revenue 1045/1968% 1494/2490% 1699/2832%
53.1% 60.0% 60.0%
Net profit margin 183/1968% 174/2490% 115/2832%
9.3% 7.0% 4.1%
Total overhead to revenue 740/1968% 822/2490% 1,018/2,832%
37.6% 33.0% 35.9%
Distribution expenses to revenue 154/1968% 186/2490% 255/2832%
7.8% 7.5% 9.0%
Selling expenses to revenue 414/1968% 459/2490% 533/2832%
21.0% 18.4% 18.8%
Administrative exp. to revenue 166/1968% 174/2490% 224/2832%
8.4% 7.0% 7.9%
Finance expenses to revenue 0.00 0.0% 0.0%
 0.3% 0.1% 0.2%
Return on capital employed 183/567% 174/696% 115/781%
32.3% 25.0% 14.7%
Strategic financial objective performance - 2019
Actual Plan Variance
Revenue: ₦m ₦m ₦m
Total 2,832 3,150 - 318
Retail 867 945 - 78
Hospitality 1,965 2,205 - 240
Gross Profit margin: Total 1,133 1,260 - 127
Retail 299 378 - 79
Hospitality 834 882 - 48
Net operating profit 115 236 - 121

ADJUSTMENTS FOR KANO TRADERS

Packs delivered 1,500
Price per pack ₦1,000
Total sales value N1,500,000
Cost of sales per pack N600
Total cost of sales ₦600,000
2019
₦m
Revenue before adjustment 2,832.0
Less: sales to Kano Traders 1.5
Revenue after adjustment 2,830.5

Gross profit before adjustment 1,133.0

Less: grossp profit on Kano Traders 0.4
Gross profit after adjustment 1132.6

Net operating profit before adjustment 115

Less proft on Kano Traders 0.4
Net operating profit after adjustment 114.6

New gross profit margin 1132.6/2830.5%

40.0%

New net profit margin 114.6/2830.5%

4.0%

New return on capital employed 114.6/781%

14.7%
 CHANGE % 2019 CHANGE CHANGE %
₦m ₦m
26.5 2,832 342 12.1
43.0 -1,699 -205 12.1
7.9 1,133 137 12.1
20.8 -255 -69 27.1
10.9 -533 -74
4.8 -224 -50 22.3
-6.3 121 -56 -46.3
-50.0 -6 -3 50.0
-4.9 115 -59 -51.3

27.4 867 82 10.4

27.2 -568 -54 10.5
281.3 -48 74 -60.7
383.1 -100 243 -70.8
- 278.0 151 345 -177.8
-239.66 17.42 42.13 -170.47

26.1 1,965 260 13.2

-23.6 -1,131 -151 13.4
-47.5 -207 -58 28.0
-17.2 -433 -59 13.6
- 17.9 194 -8 -4.1
- 34.89 9.87 -1.97 -20.0
Variance %

- 10.1
- 8.3
- 10.9
- 10.1
- 20.9
- 5.4
- 51.3
Appendice 2
Delware Exotic Wares Limited
Evaluation of Spicey Restaurants business proposal
First year - 2020
Tableware ₦m
Planned replacement (21 x N250) 5.25
Unplanned replacement (110 x N50,000); (122 x N50,000) 5.50
New restaurants (5 x N500,000); (12 x N500,000) 2.50
Total additional income 13.25

Kitchenware
New (110 x N500,000); (12 x N500,000) 55.00
Replacement (0 x 0); (110 x N100,000) -
Total from kitchenware 55.00

Total additional income from Spicey business 68.25

Less: management time opportunity cots (400 x N1,200) - 0.48
67.77
Delware Exotic Wares Limited
Evaluation of Sheravile Hotels business proposal
₦m
Additional revenue (N500,000 x 210); (N750,000 x 210) 105.00
Less: management time opportunity costs (400 x N1,500) - 0.60
104.40

Delware Exotic Wares Limited

Projection of income statement 2020-2021 2019 Actual
₦m
Revenue 2,832.0
Manufacturing costs - 1,699.0
Gross profit 1,133.0
Operating expenses:
Distribution expenses 255.0
Selling exoenses 533.0
Administrative expenses 224.0
Finance expenses 6.0
Total operating expenses 1,018.0
Net operating income 115.0

Projection with Sheravile business Retail

Revenue without Sheravile business 971
Additional revenue - Sheravile 0
971
Manufacturing costs -624.8
Gross profit 346.2
Less operating expenses

Less magangement time opportunity costs

Net operating income

Retail
Projection with Spicey business
Revenue without Spicey business 971.0
Additional revenue - Spicey -
971.0
Manufacturing costs - 624.8
Gross profit 346.2
Less operating expenses

Less magangement time opportunity costs

Net operating income

Comparison with financial objectives - Sheravile

Financial objectives
Revenue: ₦m
Total 3,465.0
Retail 1,040.0
Hospitality 2,425.0
Gross Profit margin: Total 1,386.0
Retail 416.0
Hospitality 970.0
Net operating profit 260.0

Comparison with financial objectives - Spicey

Financial objectives
Revenue: ₦m
Total 3,465.0
Retail 1,040.0
Hospitality 2,425.0
Gross Profit margin: Total 1,386.0
Retail 416.0
Hospitality 970.0
Net operating profit 260.0
 Second year - 2021
₦m
5.25
6.10
6.00
17.35

6.00
11.00
17.00

34.35
-
34.35

₦m
157.50
-
157.50

expected increase 2020 projection expected increase 2021 projection

% ₦m % ₦m
12 3,171.8 12 3,552.5
10 (1,868.9) 10 - 2,055.8
1,302.9 1,496.7

10 280.5 10 308.6
10 586.3 10 644.9
10 246.4 10 271.0
10 6.6 10 7.3
1,119.8 1,231.8
183.1 264.9

Hospitality Total Retail Hospitality Total

2200.8 3,171.8 1087.5 2464.9 3552.4
105 105 0 157.5 157.5
2305.8 3,276.8 1,087.5 2,622.4 3,709.9
-1303.5 - 1,928.3 -687.3 -1509.4 - 2,196.7
 1,002.3 1,348.5 400.2 1,113.0 1,513.2
1,119.8 1,231.8
228.7 281.4
0.6 -
228.1 281.4

Hospitality Total Retail Hospitality Total

2,200.8 3,171.8 1,087.5 2,464.9 3,552.5

68.3 68.3 - 34.4 34.4
2,269.1 3,240.1 1,087.5 2,499.3 3,586.8
- 1,282.7 - 1,907.5 - 687.3 - 1,438.5 - 2,125.8
986.4 1,332.6 400.2 1,060.8 1,461.0
1,119.8 1,231.8
212.8 229.2
0.5 -
212.3 229.2

Projection Variance % Financial objectives Projection

₦m ₦m ₦m ₦m
3,276.8 - 188.2 -5.4 3,810.0 3,709.9
971.0 - 69.0 -6.6 1,143.0 1,087.5
2,305.8 - 119.2 -4.9 2,667.0 2,622.4
1,348.5 - 37.5 -2.7 1,524.0 1,513.2
346.2 - 69.8 -16.8 457.0 400.2
1,002.3 32.3 3.3 1,067.0 1,113.0
228.1 - 31.9 -12.3 286.0 281.4

Projection Variance % Financial objectives Projection

₦m ₦m ₦m ₦m
3,240.1 - 224.9 -6.5 3,810.0 3,586.8
971.0 - 69.0 -6.6 1,143.0 1,087.5
2,269.1 - 155.9 -6.4 2,667.0 2,499.3
1,332.6 - 53.4 -3.9 1,524.0 1,461.0
346.2 - 69.8 -16.8 457.0 400.2
986.4 16.4 1.7 1,067.0 1,060.8
212.3 - 47.7 -18.3 286.0 229.2
Variance %
₦m
- 100.1 -2.6
- 55.5 -4.9
- 44.6 -1.7
- 10.8 -0.7
- 56.8 -12.4
46.0 4.3
- 4.6 -1.6

Variance %
₦m
- 223.2 -5.9
- 55.5 -4.9
- 167.7 -6.3
- 63.0 -4.1
- 56.8 -12.4
- 6.2 -0.6
- 56.8 -19.9