In addition to the above, the following information is avalable: All sales and purchases of inventory are on credit. Inventories on 31 December 2020 amounted to R1 500000 . Credit terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted to debtors. Dividends declared for the years ended 31 December 2021 and 2022 amounted to R1 169280 and R1 422000 respectively. The financial manager of Orbit Limited provided the following forecasts for 2023 : Sales are estimated at 8000 units with a selling price of R1 800 each. The manufacturing costs include direct materials of R460 per unit, direct labour of R315 per unit, variable overheads of R170 per unit and fixed overheads of R880 000. Fixed selling and administration costs are estimated at R2 000000 and the variable selling costs are estimated to be 7.5% of sales. The directors are confemplating diversification in 2024 by enfering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500000 . An additional R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4 100000 and the annual revenues from transporting the passengers are estimated at R7 000000 . The buses REQUIRED Calculate the appropriate ratios (expressed to two decimal places) and provide an interpretation of your answers for each of the following over the two-year period: 2.1 The effectiveness of the company regarding the management of its accounts payable. (5 marks) 2.2 The ability of the company to settle its short-term debts under distress conditions. (4 marks) 2.3 The percentage of the profit that has been retained in the company. (4 marks) 2.4 The profitabiity of the company from the point of view of the shareholders. (4 marks) 2.5 A measure of the efficiency with which the total assets of company are managed. (4 marks) 2.6 The effectiveness of the credit administration of the company in respect of its customers who purchase on credit. (4 marks) QUESTION 3 (25 Marks) REQUIRED Refer to the forecasts made by the financial manager for 2023 and calculate the following independently. As far as possible, use the contribution margin format of the income statement to present your answers. 3.1. Break-even quantity. (5 marks) 3.2 The sales value required to make an operating profit of R2016 000, by using the contribution margin ratio. (5 marks) 3.3 The percentage change in the operating profit (expressed to two decimal places), if the selling price and fxed costs increase by 10%. (5 marks) 3.4 The total Contribution Margin and Operating Profitl Loss if the sales volume is 10% below expectation. (5 marks) 3.5 The selling price per unit (expressed in rands and cents) that will enable the company to break even. (5 marks) Read the case study and answer the questions that follow. ORBIT LIMITED: FINANCIAL PERFORMANCE AND FORECASTING The mission of Orbit Limited is to achieve its vision by providing an innovative product and creative customer experiences. It's talented staff are guided by the values, social conscience and customer-centric mindset espoused by the board of directors. At the core of Orbit Limited is its customers. The company is committed to successful growth by delivering excelent service to its customers to whom it offers quality and value. It is for these reasons that Orbit Limited was able to achieve sucoess in the marketplace. However, the management has identffed the need to improve in certain respects. The folowing are the financial statements for the past two years: are expected to have a total salvage value of R1 000000 and the estimated useful life of the buses is five years. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using the straight-line method. QUESTION 1 (25 Marks) REQUIRED 1.1 Calculate the increase in the retained earnings over the two-year period. (2 marks) 1.2 By how much did the interest income increase or decrease from 2021 to 2022? Provide a possible reason for the change. (3 marks) 1.3 Comment on the investing activities of the company. (4 marks) 1.4 Calculate the amount that would be reflected as "Changes in working capital" in the Statement of Cash Flows for the year ended 31 December 2022. (4 marks) 1.5 Without making use of any ratios, provide an interpretation of the following over the twoyear period: 1.5.1 Inventories (4 marks) 1.5.2 Accounts receivable (4 marks) 1.6 Calculate the cost (as a percentage) of not accepting discounts from creditors in settlement of accounts. (4 marks) In addition to the above, the following information is avalable: All sales and purchases of inventory are on credit. Inventories on 31 December 2020 amounted to R1 500000 . Credit terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted to debtors. Dividends declared for the years ended 31 December 2021 and 2022 amounted to R1 169280 and R1 422000 respectively. The financial manager of Orbit Limited provided the following forecasts for 2023 : Sales are estimated at 8000 units with a selling price of R1 800 each. The manufacturing costs include direct materials of R460 per unit, direct labour of R315 per unit, variable overheads of R170 per unit and fixed overheads of R880 000. Fixed selling and administration costs are estimated at R2 000000 and the variable selling costs are estimated to be 7.5% of sales. The directors are confemplating diversification in 2024 by enfering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500000 . An additional R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4 100000 and the annual revenues from transporting the passengers are estimated at R7 000000 . The buses REQUIRED Calculate the appropriate ratios (expressed to two decimal places) and provide an interpretation of your answers for each of the following over the two-year period: 2.1 The effectiveness of the company regarding the management of its accounts payable. (5 marks) 2.2 The ability of the company to settle its short-term debts under distress conditions. (4 marks) 2.3 The percentage of the profit that has been retained in the company. (4 marks) 2.4 The profitabiity of the company from the point of view of the shareholders. (4 marks) 2.5 A measure of the efficiency with which the total assets of company are managed. (4 marks) 2.6 The effectiveness of the credit administration of the company in respect of its customers who purchase on credit. (4 marks) QUESTION 3 (25 Marks) REQUIRED Refer to the forecasts made by the financial manager for 2023 and calculate the following independently. As far as possible, use the contribution margin format of the income statement to present your answers. 3.1. Break-even quantity. (5 marks) 3.2 The sales value required to make an operating profit of R2016 000, by using the contribution margin ratio. (5 marks) 3.3 The percentage change in the operating profit (expressed to two decimal places), if the selling price and fxed costs increase by 10%. (5 marks) 3.4 The total Contribution Margin and Operating Profitl Loss if the sales volume is 10% below expectation. (5 marks) 3.5 The selling price per unit (expressed in rands and cents) that will enable the company to break even. (5 marks) Read the case study and answer the questions that follow. ORBIT LIMITED: FINANCIAL PERFORMANCE AND FORECASTING The mission of Orbit Limited is to achieve its vision by providing an innovative product and creative customer experiences. It's talented staff are guided by the values, social conscience and customer-centric mindset espoused by the board of directors. At the core of Orbit Limited is its customers. The company is committed to successful growth by delivering excelent service to its customers to whom it offers quality and value. It is for these reasons that Orbit Limited was able to achieve sucoess in the marketplace. However, the management has identffed the need to improve in certain respects. The folowing are the financial statements for the past two years: are expected to have a total salvage value of R1 000000 and the estimated useful life of the buses is five years. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using the straight-line method. QUESTION 1 (25 Marks) REQUIRED 1.1 Calculate the increase in the retained earnings over the two-year period. (2 marks) 1.2 By how much did the interest income increase or decrease from 2021 to 2022? Provide a possible reason for the change. (3 marks) 1.3 Comment on the investing activities of the company. (4 marks) 1.4 Calculate the amount that would be reflected as "Changes in working capital" in the Statement of Cash Flows for the year ended 31 December 2022. (4 marks) 1.5 Without making use of any ratios, provide an interpretation of the following over the twoyear period: 1.5.1 Inventories (4 marks) 1.5.2 Accounts receivable (4 marks) 1.6 Calculate the cost (as a percentage) of not accepting discounts from creditors in settlement of accounts. (4 marks)