GROUP DISCUSSION 4

FINANCIAL STATEMENT ANALYSIS

PARTNERS: KINGSFORD AND MAHLONI

PROGRAM: MASTERS (FINANCE)

a. Does your company have any investment securities?

First and foremost, investment securities are tradable financial assets such as equities or

debt instruments purchased with the intention of holding them for investment. Below are

the companies under review with respect to the question above.

TOTAL GHANA LTD.

The company has investment in associates and this represents investments in:

 Ghana Bunkering Services Limited: The investment in Ghana Bunkering

Limited represents shares, held by the Company conferring the right to exercise

48.5% of votes exercisable at general meetings. The investment in GBS Limited

amount to GH¢12,000. Ghana Bunkering Services Limited is a company

incorporated in Ghana to provide bunkering services to petroleum marketers in

the country.

 Road Safety Limited (RSL): The company has a 50% interest in RSL (formerly,

Petroleum Road Transport Safety Limited), a company incorporated in Ghana. Its

principal business is to provide driver education and maintenance services for the

haulage of petroleum products. The investment in RSL is less than GH¢1,000 and

the directors of the Group are of the view that the results of Road Safety Limited

are very immaterial to the Group and as such its results have not been included in
 the consolidated financial statements. However, the results of Ghana Bunkering

Services Limited have been included in the consolidated financial statements.

Moreover, the Company has a 55% interest in Ghanstock Limited, a company incorporated in

Ghana and authorised to build, own, operate and maintain petroleum storage facilities.

Ghanstock Limited changed its functional and presentation currency from Ghana Cedis to United

States Dollars during the current year. Foreign currency differences that arose on translation

amounting to GH¢9,772,000 are recognized in other comprehensive income.

As at the end of the current year, the subsidiary, Ghanstock’s, net liability position was

GH¢7,110,000 which exceeded the Company’s investment in the subsidiary of GH¢4,774,000.

The projected cash flows were updated to reflect the current economic conditions of the

subsidiary.

GOIL

The company has 1,040,528 shares held in Total Petroleum Ghana Limited. In addition, GOIL

Company Limited wholly owned two subsidiaries, Goenergy Company Limited and GOIL

Offshore Company Limited. Goenergy Company Limited is permitted by its regulations to carry

on, the business of bulk importers, storage, suppliers and bulk distributors and buyers and sellers

of petroleum products, whiles the principal activity of GOIL Offshore Company Limited is oil

and gas. The Company is also, to provide consultancy and other support services to the West

African market.

Moreover, the company has investment in the securities of Tema Lube Oil Company Ltd., Metro

Mass Transit Co. Ltd., JUHI, and Ghana Bunkering Services Limited. Below are the monetary
values of the investment in subsidiaries and fair value through OCI investments as at 2019 year

under review.

GH¢

Ghana Bunkering Services Limited 222,000

Goenergy Company Limited(Subsidiary) 30,000

Goil Offshore Company Limited(Subsidiary) 1,000,000

Total Ghana Ltd. 3,122,000

Tema Lube Oil Company Ltd 11,000

Metro Mass Transit Co. Ltd. 414,000

JUHI 2,910,000

b. Does it reflect the company’s business strategy? Did your company made significant

influences on affiliates through equity investment?

The companies’ investments reflect their business strategies.

Firstly, considering Total Ghana, it made investment in Ghana Bunkering Services Limited and

Road Safety Limited. The former provide bunkering services to petroleum marketers in the

country. Since Total Ghana is also a petroleum marketing company, investment in GBS Limited

will therefore ensure favorable terms of operations and services that will enable the firm achieve

great financial and operational performance through gaining competitive advantage.

With the latter company, Road Safety Limited (RSL), whose principal business is to provide

driver education and maintenance services for the haulage of petroleum products, investment in

this firm will help promote the firm’s product through awareness creation.

Considering GOIL, its investment in Goenergy Company Limited reflects significantly on the

firm’s business strategy. Geoenergy is permitted by its regulations to carry on, the business of

bulk importers, storage, suppliers and bulk distributors and buyers and sellers of petroleum

products. The Company is also, to provide consultancy and other support services to the West

African market. This functions performed by the investee company directly reflects the firm’s

business strategy.

c. Does investing activity contribute a large part of your companies’ outcome?

TOTAL GHANA LTD.

Analysing Total Ghana’s cash flow statement, it could be seen that:

 Net cash flow from operating activities amounted GH¢98,937,000

 Net cash flow used in investing activities totaled GH¢ (60,552,000)

 Net cash flow used in financing activities totaled GH¢ (37,833,000).

Investing activities contribute to a large part of the company’s outcome. The major component of

the firm’s investing activities is the purchase of property, plant, and equipment. It contributes to

almost 98% of the firm’s investing activity. Moreover, with the total amount of GH¢98,937,000

generated, GH¢60,552,000 equaling 61.20% of operating cash flow amount was used for

investing activities with just 38.80% relating to financing activities. The firm’s return on PPE, a
major item of the firm’s investing activity equals 0.19 thus 19%. Considering other activities,

this contributes to a larger percentage of the firm’s returns.

GOIL

Analysing GOIL’s cash flow statement, it could be seen that:

 Net cash flow from operating activities amounted GH¢136,960,000

 Net cash flow used in investing activities totaled GH¢ (213,486,000)

 Net cash flow used in financing activities totaled GH¢ 89,041,000.

The investing activities include increase in investment made amounting to GH¢1,000,000.

Interest and dividend received also equals GH¢ 3,901,000. Just like TOTAL, the major

component of the firm’s investing activities is the purchase of PPE. This contributes to alarger

part of the firm’s outcome. With investment in securities its contribution to the firm’s outcomes

looks insignificant.

d. Any accounting distortions?

This refers to any kind of deviation and divergence between information reported by financial

statements and the reality of the business. This is mostly than using accounting alternatives

within the accounting standard to inconsistently decrease or increase reported profit for a specific

period. Analyzing the two companies, there were no accounting distortions with regards to

investment securities. Looking at the financial statements, all investment securities were rightly

classified.

e. Commenting on company’s investing activities

 TOTAL: the firm’s investing activity includes purchase of PPE, purchase of software,

payment for leasehold premium, related party loan, and long term prepayments. The

major item is the purchase of PPE.

 GOIL: the firm’s investing activities comprises acquisition of PPE, receipt and disposal

of PPE, interest and dividend received and paid, as well as increases in investment made.

Net cash flow relating to investing activities totaled GH¢ (213,486,000). This exceeds

cash flows from operating activities. The firm’s major investment is usually the

acquisition of PPE, with investment in securities very insignificant; this is seen from the

small amount of dividend and interest received over the year.