- Property, plant and equipment Land and buildings Plant and machinery EQUITY AN

Question

- Property, plant and equipment Land and buildings Plant and machinery EQUITY AND LIABELITIES Ordinay share capital 1. Additional plant and machinery were purchased during 2018 Thero were no other non-current asset 2. An interim dividend of R200 000 was paid on ordinary shares during the year The return on equity for 2017 was 18%. REQUIRED S.1 Use the information provided above to cakculate the following ratios for 2018 (Where applicable, express your answers to two decimal places 5.1.1 Profit margin 12 Debeors collection period 5.1.3 Inventory turnover 5.14 Return on assets 5.1.5 Acid-test ratio 1.7 Return on equity 5.2 Comment on the return on equity caloulated in question 5.1.7 5.3 Refer to the appeopriate ratio in question S.1 and explain whether the company will be able to pay its

Explanation / Answer

Ans 5.1

Profit Margin= Gross Profit/ Sales

= 10,76,000/2304000

=46.70%

5.1.2

Debtors Collection Period = 360*Debtors/sales

=360*400000/2304000= 62.5 Days

Inventory Turnover= Average Inventory/ Cost of Goods sold

Average Inventory= 164000+176000/2=170000

Inventoy turnover= 12,28,000/170000= 7.22

Reurun on Assets= Net income/ Total Assets

= 588000/2984000

=19.71%

Acid Test Ratio = Cash+Accounts Receivable+Short term Investment/ Current Liability

= 400000+156000/532000

=1.05

Debt to Assets= Total Liabilities/ Total Assets

= 15,32,000/2984000

=0.51

Return on Equity =

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