70.2K

Verified Solution

Link Copied!

QUESTION $4(20$ Marks$)$

REQUIRED

Use the information provided below to answer the following questions. Note: Use the formulas provided in

the formula sheet only $($that appear after QUESTION $5).$ The answers to the ratios must be expressed to two

decimal places.

$4\mathrm{.}1$ Calculate the ratio that determines the company$$s profitability after the cost of sales have

been deducted from the sales. $(2$ marks$)$

$4\mathrm{.}2$ Compare the earnings per share with the dividend per share for $2023.$ What conclusions

can you draw from this comparison? $(4$ marks$)$

$4\mathrm{.}3$ Will the shareholders be satisfied with the return earned by the company on the own

capital? Motivate your answer by using an appropriate ratio. $(3$ marks$)$

$4\mathrm{.}4$ Comment on the ability of the company to settle its short$-$term obligations with just its most

liquid current assets. Use a ratio to support your answer. $(3$ marks$)$

$4\mathrm{.}5$ Comment on the effectiveness with which the company has managed the inventory,

debtors and creditors. Support your answer by calculating the relevant ratios. $(8$ marks$)$

INFORMATION

Excerpts of the financial data of Daiken Limited for $2023$ are as follows:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED $31$ DECEMBER $2023$

R

Sales $2200000$

Cost of sales $1538000$

Opening inventory $92000$

Purchases $?$

Closing inventory $114000$

Gross profit $?$

Operating profit $482000$

Interest expense $80000$

Profit before tax $402000$

Company tax $108540$

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER $2023$

R

Non$-$current assets $1280000$

Inventories $?$

Accounts receivable $680000$

Cash $8000$

Ordinary share capital $900000$

Retained earnings $172000$

Long$-$term loan $658000$

Accounts payable $220000$

Company tax payable $72000$

Dividends payable $60000$

Additional information

$$ All purchases and sales of inventories are on credit.

$$ There were $450000$ ordinary shares in issue during $2023.$

$$ An interim dividend of R$50000$ was paid on $30$ June $2023.$

$$ Credit terms to debtors were $30$ days whilst creditors have granted credit terms of $60$ days.

$$ Inventories were replaced after approximately $30$ days during $2022.$

Answer & Explanation Solved by verified expert

See Answer