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.
4.1 Calculate the ratio that determines the company’s profitability after the cost of sales have
been deducted from the sales. (2 marks)
4.2 Compare the earnings per share with the dividend per share for 2023. What conclusions
can you draw from this comparison? (4 marks)
4.3 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)
4.4 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)
4.5 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 2 200 000
Cost of sales 1 538 000
Opening inventory 92 000
Purchases ?
Closing inventory 114 000
Gross profit ?
Operating profit 482 000
Interest expense 80 000
Profit before tax 402 000
Company tax 108 540
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
R
Non-current assets 1 280 000
Inventories ?
Accounts receivable 680 000
Cash 8 000
Ordinary share capital 900 000
Retained earnings 172 000
Long-term loan 658 000
Accounts payable 220 000
Company tax payable 72 000
Dividends payable 60 000
Additional information
■ All purchases and sales of inventories are on credit.
■ There were 450 000 ordinary shares in issue during 2023.
■ An interim dividend of R50 000 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.
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