Question
1. Thefollowingratiosofabusinessaregiventoyou.Youarerequestedtointerpretanddothe financial judgement based on yourunderstanding. (10 marks) Current ratio 564 880 / 351 100=1.6 times Profitmargin 102 500 / 2 900 000=3.5% Stock
1. Thefollowingratiosofabusinessaregiventoyou.Youarerequestedtointerpretanddothe financial judgement based on yourunderstanding. (10 marks)
Current ratio 564 880 / 351 100=1.6 times
Profitmargin 102 500 / 2 900 000=3.5%
Stock turn-over 1 750 000 / 135 230=12.94 times
2. Explain threemotives ofholding cash by a business. (6 marks)
3. BabokiLtdareplanningtoinvestinanewprojectwhichwillcostaninitialP375000andthey expect thefollowing cash.
| Year | 1 | NetCashProfits (P) 25 000 |
| 2 | 55 000 | |
| 3 | 70 000 | |
| 4 | 80 000 | |
| 5 | 40 000 | |
| 6 | 30 000 |
TheinvestmentwillbedepreciatedtoascrapvalueofP175,000overtheperiodoftheproject.
Calculate theAccounting Rate ofReturn (Return on Capital Employed)of theproject.(4 marks)
4. Explain thedifferences between fixed and flexiblebudgets and their relevancein evaluating operational performance. 5Marks
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