The management of Mavuno Ltd. wants to establish the amount of financial needs for the next...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The management of Mavuno Ltd. wants to establish the amount of financial needs for the next two years. The balance sheet of the firm as at 31 December 2011 is as follows: Net fixed assets Stock Debtors Cash Total assets Financed by: Ordinary share capital Retained earnings 12% long-term debt Trade creditors Accrued expenses Sh.'000' 124,800 38,400 28,800 7,200 199,200 84,000 35,200 20,000 36,000 24,000 199,200 For the year ended 31 December 2011, sales amounted to Sh.240,000,000. The firm projects that the sales will increase by 15% in year 2012 and 20% in year 2013. The after tax profit on sales has been 11% but the management is pessimistic about future operating costs and intends to use an after-tax profit on sales rate of 8% per annum. The firm intends to maintain its dividend pay out ratio of 80%. Assets are expected to vary directly with sales while trade creditors and accrued expenses form the spontaneous sources of financing. Any external financing will be effected through the use of commercial paper. Required: (a) Determine the amount of external financial requirements for 2012 and 2013. (15 marks) The management of Mavuno Ltd. wants to establish the amount of financial needs for the next two years. The balance sheet of the firm as at 31 December 2011 is as follows: Net fixed assets Stock Debtors Cash Total assets Financed by: Ordinary share capital Retained earnings 12% long-term debt Trade creditors Accrued expenses Sh.'000' 124,800 38,400 28,800 7,200 199,200 84,000 35,200 20,000 36,000 24,000 199,200 For the year ended 31 December 2011, sales amounted to Sh.240,000,000. The firm projects that the sales will increase by 15% in year 2012 and 20% in year 2013. The after tax profit on sales has been 11% but the management is pessimistic about future operating costs and intends to use an after-tax profit on sales rate of 8% per annum. The firm intends to maintain its dividend pay out ratio of 80%. Assets are expected to vary directly with sales while trade creditors and accrued expenses form the spontaneous sources of financing. Any external financing will be effected through the use of commercial paper. Required: (a) Determine the amount of external financial requirements for 2012 and 2013. (15 marks)
Expert Answer:
Answer rating: 100% (QA)
The detailed answer for the above question is provided below a External Financial Req... View the full answer
Related Book For
International Financial Reporting A Practical Guide
ISBN: 978-1292200743
6th edition
Authors: Alan Melville
Posted Date:
Students also viewed these finance questions
-
The statement of financial position as at 31 December 20X2 of Zoom Products Ltd included: Trade receivables...............................85,360 The financial statements for the year ended 31...
-
The trial balance of Protege Enterprise as at 31 December 2019 is as follows: The trial balance of Protege Enterprise as at 31 December 2019 is as follows: Credit RM) 72.440 Debit (RM) 165.520 3,520...
-
The account balances of Delta Co. as at 31 December 2019, are presented below. 1. Inventory 6,500 2. Accounts receivables 20,000 3. Accounts Payables 9,000 4. Gross profit 10,000 5. Cost of sales...
-
Name the following compounds.
-
Fusion temperatures are often given in keV. Determine the conversion factor from kelvins to keV using, as is common in this field, KE = kT without the factor 3/2,
-
What is a transfer price? Why is it an important issue for companies with foreign affiliates? Why did transfer pricing in Europe take on increased importance in 1999?
-
Harrison Ford has opening stock of 30,000 and makes purchases during the year of 340,000. He removes goods costing 1,500 for his own use, and the business achieves a constant mark-up of 20 percent on...
-
1. Do you believe covenants not to compete, such as the one in BDO Seidman, are ethical? Do they violate any rules of conduct in the AICPA Code? 2. Who are the stakeholders in the BDO case and what...
-
On January 1, a company purchased new furniture at a cost of $16,000. The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value. The company uses the straight-line method...
-
Prepare journal entries for the above transactions. Aylmer Industries Inc. (Aylmer) has been in business since 2018. Aylmer has two main business segments. This first segment is the construction of...
-
Muscat City Desalination Company financial statements Income Statement and Statement of Balance sheet attached. Analyze the information contained in the companys balance sheet and income statements...
-
If the landing gear of the aircraft is not retracted, please explain how it affects the flight performance of the aircraft.
-
Suppose a low-speed aircraft is flying at an altitude of 3000 m at an altitude of 360 km/h. If the wing area is 40 m2, the average chord length is 2.5 m. Try to estimate the frictional resistance of...
-
Qualitatively explain the reasons for the difference in the aerodynamic force of the flat plate, curved plate, and airfoil.
-
Why did double-wing and triple-wing aircraft appear in the early days, but they are all gone today. Explain the main measures to increase the lift of the aircraft.
-
Try to find the power to overcome air resistance when a car is driving at a speed of 60 km/h. It is known that the projected area of the car perpendicular to the direction of motion is 2 m2, the drag...
-
Mazie Supply Company uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $100,500, and it estimates that 6% will be uncollectible. Prepare the...
-
Graph one period of each function. y = 4 cos x
-
IAS36 Impairment of Assets was issued in June 1998 and subsequently revised in March 2004 and January 2008. Its main objective is to prescribe the procedures that should ensure that an entity's...
-
A company enters into 10,000 contracts with customers, all on the same date. These contracts have very similar characteristics and therefore (as a practical expedient) the company decides to apply...
-
A company prepares financial statements to 31 December each year. The following events occurred after 31 December 2017 but before the financial statements for the year to 31 December 2017 were...
-
Find a currency of your choice. How has its value changed against the U.S. dollar over the last ninety days? What about since January 3, 1975?
-
Why is the accounting function of a firm likely to be centralized? What aspects of the accounting function should be centralized?
-
The implication from the discussion in this chapter is that as a company becomes more global, it concentrates more on the informal and subtle mechanisms for controlling global operations than it does...
Study smarter with the SolutionInn App