Explain the 3 major reasons for business valuations. Discuss two major approaches which are
frequently used. (5 Marks)
b) The directors of Upendo Plc were asked last year to improve their subdiary’s performance.
Summarized financial data at that time for the subsidiary is shown below.
Ksh 000
Turnover 840
Operating profit 95
Interest 6
Taxable profit 89
Fixed assets 580
Current assets 290
Current liabilities 210
Medium and long-term debt 40
Shareholders’ equity 620
Capital employed 660
The results for the current year have just been announced as:
Kshs. 000
Turnover 1,000
Operating profit 122
Interest 18
7
Taxable profit 104
Fixed assets 680
Current assets 350
Current liabilities 260
Medium and long-term debt 140
Shareholders’ equity 630
Capital employed 770
Required
Analyse the performance of the subsidiary, and from the perspective of the future strategic
development of Upendo Plc suggest what controls the directors of Upendo Plc might introduce
to influence the future development of the subsidiary. (15 Marks)
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