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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
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
Revaluation reserve
74
32
Other reserves
Retained earnings
457
333
Total equity
663
487
Non-current liabilities
Loans
400
210
Current liabilities
Payables
99
68
Overdraft
37
136
Total liabilities
536
278
Total equity and liabilities
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