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QUESTION $1$

$(20$ Marks$)$

REQUIRED

Study the statement of cash flows given below and answer the following questions:

$1\mathrm{.}1$

Calculate the following:

$1\mathrm{.}1\mathrm{.}1$

Dividends paid

$(2$ marks$)$

$1\mathrm{.}1\mathrm{.}2$

Carrying value $($Book value$)$ of the equipment sold

$(2$ marks$)$

$1\mathrm{.}1\mathrm{.}3$

Cash and cash equivalents at the end of year

$(2$ marks$)$

$1\mathrm{.}2$

Identify TWO $(2)$ items from this statement of cash flows that improve cash flow but do not increase profit.

$(2$ marks$)$

$1\mathrm{.}3$

Explain why depreciation is added to operating profit in computing the cash flow from operating activities.

$(2$ marks$)$

$1\mathrm{.}4$

There is a combination of a positive cash flow from operating activities of R$1504000$ and a negative cash flow from investing activities of R$8384000.$ Is this favourable for Sinclair Ltd$?$ Provide THREE $(3)$ reasons for your answer.

$(6$ marks$)$

$1\mathrm{.}5$

Comment on the following:

$1\mathrm{.}5\mathrm{.}1$

Decrease in inventory, R$264000$

$(2$ marks$)$

$1\mathrm{.}5\mathrm{.}2$

Increase in receivables, $($R$3712000)$

$(2$ marks$)$

INFORMATION

SINCLAIR LTD

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED $30$ JUNE $2021$

R

Cash flows from operating activities

$1504000$

Profit before interest and tax$/$Operating profit

$10136000$

Adjustments to convert to cash from operations

Non$-$cash flow adjustments

$6176000$

Depreciation

$6000000$

Loss on disposal of equipment

$176000$

Profit before working capital changes

$16312000$

Working capital changes

$(4112000)$

Decrease in inventory

$264000$

Increase in receivables

$(3712000)$

Decrease in payables

$(664000)$

Cash generated from operations

$12200000$

Interest paid

$(3744000)$

Dividends paid

$?$

Income tax paid

$(2880000)$

Cash flows from investing activities

$(8384000)$

Non$-$current assets purchased

$(10576000)$

Proceeds from sale of equipment

$2192000$

Cash flows from financing activities

$8640000$

Proceeds from issue of ordinary shares

$2880000$

Increase in long$-$term borrowings

$5760000$

Net increase in cash and cash equivalents

$?$

Cash and cash equivalents at beginning of year

$1440000$

Cash and cash equivalents at the end of year

$?$

QUESTION $2$

$(20$ Marks$)$

REQUIRED

Use the information provided below to answer the following questions:

$2\mathrm{.}1$

Comment on the financial result of the company.

$(2$ marks$)$

$2\mathrm{.}2$

Is the company efficient in its collection of debts arising from credit sales? Motivate your answer by using an appropriate ratio.

$(3$ marks$)$

$2\mathrm{.}3$

Will creditors allow credit under distress business conditions to Silverstone Limited? Explain your answer with the relevant ratio.

$(3$ marks$)$

$2\mathrm{.}4$

Would the shareholders be happy with the profitability of the company? Use an appropriate ratio to motivate your answer.

$(4$ marks$)$

$2\mathrm{.}5$

Calculate the ratio for $2021$ that reflects how the stock market is judging the company$$fs earnings performance and prospects.

$(4$ marks$)$

$2\mathrm{.}6$

Explain the impact on the cost of sales in the statement of comprehensive income if LIFO rather than FIFO method of valuing inventories is used during periods of rising prices.

$(4$ marks$)$

INFORMATION

Extracts of the statement of comprehensive income and statement of financial position of Silverstone Limited for $2021$ and $2020$ are as follows:

Statement of Comprehensive Income for the year ended $31$ December:

$2021($R$)$

$2020($R$)$

Sales

$6400000$

$5440000$

Cost of sales

$4000000$

$3264000$

Gross profit

$2400000$

$2176000$

Operating expenses

$960000$

$1056000$

Operating profit

$1440000$

$1120000$

Profit before tax

$1280000$

$1040000$

Profit after tax

$896000$

$728000$

Statement of Financial Position as at $31$ December:

Assets

$2021($R$)$

$2020($R$)$

Non$-$current assets

$7600000$

$6400000$

Current assets

$5240000$

$4400000$

Inventory

$2440000$

$1600000$

Accounts receivable

$1000000$

$1680000$

Cash and cash equivalents

$1800000$

$1120000$

Total assets

$12840000$

$10800000$

Equity and liabilities

Shareholders$$f equity

$9880000$

$8800000$

Non$-$current liabilities

$1600000$

$800000$

Current liabilities $($Accounts payable only$)$

$1360000$

$1200000$

Total equity and liabilities

$12840000$

$10800000$

Note:

$$

All purchases and sales of inventories are on credit.

$$

The credit terms to debtors are $30$ days.

$$

There were $2000000$ shares in issue during $2021.$

$$

The market price per share was R$5\mathrm{.}50$ on $31$ December $2021.$

QUESTION $3$

$(20$ Marks$)$

REQUIRED

Study the information given below and answer each of the following questions INDEPENDENTLY:

$3\mathrm{.}1$

Calculate the margin of safety $($in units$).$

$(4$ marks$)$

$3\mathrm{.}2$

Calculate the total Contribution Margin and Operating Profit$/$Loss$,$ if the direct materials are expected to cost R$30$ per unit more and fixed manufacturing overhead costs are $10\%$ greater than projected.

$(4$ marks$)$

$3\mathrm{.}3$

Calculate the variable cost per unit to break even, if the fixed costs and selling price per unit remain the same but the break$-$even quantity changes to $6000$ units.

$(4$ marks$)$

$3\mathrm{.}4$

Use the contribution margin ratio to determine the level of sales in

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