Description

• 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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