CASE STUDY PROGRAMME Advanced Diploma in Business Management MODULE Business Finance YEAR One (1) INTAKE July 2021 TOTAL MARKS 30 Answer ALL questions. [30 MARKS] QUESTION 1 (20 Marks) REQUIRED Use the information provided below to prepare the Cash Flow Statement of Fairmont Limited for the year ended 31 December 2019. Use the following format as a guide. (Commence with the profit before working capital changes of R240 000.) CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2019 R Cash flows from operating activities Profit before working capital changes 240 000 Working capital changes Increase/decrease in inventory Increase/decrease in receivables Increase/decrease in payables Cash generated from operations Interest paid Interest income Dividends paid Income tax paid Net cash inflow from operating activities Cash flow from investing activities Non-current assets purchased Investments increase/redeemed Net cash flow from investing activities Cash flow from financing activities Proceeds from issue of ordinary shares Long-term borrowings increase/decrease Net increase/decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year INFORMATION Fairmont Limited Statement of Comprehensive Income for the year ended 31 December 2019 R Sales 1 100 000 Cost of sales (650 000) Gross profit 450 000 Operating expenses (285 000) Selling and administrative expenses (210 000) Depreciation (75 000) Operating profit 165 000 Interest expense (45 000) Profit before tax 120 000 Income tax (40 000) Profit after tax 80 000 Statement of Financial Position as at 31 December: Assets 2019 (R) 2018 (R) Non-current assets 660 000 540 000 Plant and equipment 1 200 000 1 000 000 Accumulated depreciation (575 000) (500 000) Investments 35 000 40 000 Current assets 455 000 415 000 Inventories 215 000 205 000 Accounts receivable 190 000 175 000 Cash and cash equivalents 50 000 35 000 Total assets 1 115 000 955 000 Equity and liabilities Equity 610 000 560 000 Ordinary share capital (155 000 shares) 310 000 310 000 Retained earnings 300 000 250 000 Non-current liabilities 360 000 335 000 Current liabilities 145 000 60 000 Accounts payable 120 000 27 000 Dividends payable 20 000 25 000 Income tax payable 5 000 8 000 Total owners equity and liabilities 1 115 000 955 000 Note: Dividends paid and recommended during 2019 amounted to R30 000. All purchases and sales of inventories are on credit. Purchases for the year ended 31 December 2019 amounted to R660 000. QUESTION 2 (10 Marks) REQUIRED Use the information provided in Question 1 to calculate the following ratios for 2019 (answers rounded off to two decimal places): 2.1 Inventory turnover (1 mark) 2.2 Average collection period (1 mark) 2.3 Average payment period (1 mark) 2.4 Return on equity (1 mark) 2.5 Gross profit margin (1 mark) 2.6 Earnings per share (1 mark) 2.7 Dividends per share (1 mark) 2.8 Current ratio (1 mark) 2.9 Acid test ratio (1 mark) 2.10 Debt to assets (1 mark) Assignment format You must include a Table of Contents page and a bibliography. Text: Arial or Times New Roman (12); Spacing 1 lines. All text must be justified at each margin. Where applicable, use formats and formulas from your study guide. Start each question on a new page. Number each solution according to the numbering of the relevant question. Solutions generated by software packages will not be marked. No marks will be awarded if only the final answers are given. All relevant workings/formats must be shown.