INTERMEDIATE FINANCIAL ACCOUNTING (a) Depreciation charged for the three years in question was Year ended 30 Jume 2014 2015 2016 Cigalles Ltd has carried on business for a number of years as a retailer of a wide variety of consumer products. The entity operates from a number of stores around the country. In recent years the entity has found it necessary to provide credit facilities to its customers in order to maintain growth in revenue. As a result of this decision the liability to its bankers has increased substantially. The statutory financial statements for the year ended 30 June 2016 have recently been published and extracts are provided below, together with comparative figures for the previous two years. m Em m 55 60 70 (b)The other interest bearing borrowings include 50m of 6% convertible loan stock. This stock is convertible into a total of 15 million ordinary shares in 2018 The repayment of the non-convertible interest bearing borrowings other than the convertible loan stock is due on 30 June 2020. STATEMENTS OF PROFIT OR LOSS FOR THE YEARS ENDED 30 JUNE (c) Dividends of 30m were paid in 2014 and 2015. A dividend of 20m has been proposed. Issued capital consisted of90 million ordinary shares at the nominal value of l at 1 July 2013. No shares have been issued or reacquired after that. 2016 (d) The bank loans are unsccured. The maximum lending facility the bank will provide is 630m. 1.850 Sales revenue Cost of sales Gross profit Other operating costs Operating proft (1.250)(1,500) 600 (1.750) (e) Over the past three years the level of credit sales has been: Year ended 30 June 2014 2015 2016 (550) (640) (700) Em Em m 300 400 600 60 120 (60) Interest revenue from credit sales Profit before interest and tax Interest expense Profit before taxation Taxation Profit for the year 45 95 (f) The income tax rate is 33%. The entity offers extended credit terms for certain products to maintain market share in a highly competitive environment. (23) (20) (10) Giren the steady increase in the level of bank loans which has taken place in recent years, the entity has recently written to its bankers to request an increase in the lending facility. The request was received by the bank on 15 October 2016, two weeks after the financial statements were published. The bank is concerned at the steep escalation in the level of the loans and has asked for areport on the financial performance of Cigalles Ltd. for the last three STATEMENTS OF FINANCIAL POSITION AT 30 JUNE Property, plant and equipmen Inventories Trade receivables 322 620 633 278 290 540 550 12 1,392 400 492 1,182 90 Required: 1. Calculate the following ratios for the three years (show the formulae and your workings) Total assets Share capital Total equit Gross profit margin and profit margin before interest and tax 90 90 Operating costs to sales Inventory tumover Trade receivable daysl 372 Bank loans Other interest bearing borrowings Trade payables Tax payable Total liabilities and equin 520 200 20 ,392 200 Interest cover Asset turmover 4,182 4,500 1 Consider credit sales together with the related Interest revenue INTERMEDIATE FINANCIAL ACCOUNTING (a) Depreciation charged for the three years in question was Year ended 30 Jume 2014 2015 2016 Cigalles Ltd has carried on business for a number of years as a retailer of a wide variety of consumer products. The entity operates from a number of stores around the country. In recent years the entity has found it necessary to provide credit facilities to its customers in order to maintain growth in revenue. As a result of this decision the liability to its bankers has increased substantially. The statutory financial statements for the year ended 30 June 2016 have recently been published and extracts are provided below, together with comparative figures for the previous two years. m Em m 55 60 70 (b)The other interest bearing borrowings include 50m of 6% convertible loan stock. This stock is convertible into a total of 15 million ordinary shares in 2018 The repayment of the non-convertible interest bearing borrowings other than the convertible loan stock is due on 30 June 2020. STATEMENTS OF PROFIT OR LOSS FOR THE YEARS ENDED 30 JUNE (c) Dividends of 30m were paid in 2014 and 2015. A dividend of 20m has been proposed. Issued capital consisted of90 million ordinary shares at the nominal value of l at 1 July 2013. No shares have been issued or reacquired after that. 2016 (d) The bank loans are unsccured. The maximum lending facility the bank will provide is 630m. 1.850 Sales revenue Cost of sales Gross profit Other operating costs Operating proft (1.250)(1,500) 600 (1.750) (e) Over the past three years the level of credit sales has been: Year ended 30 June 2014 2015 2016 (550) (640) (700) Em Em m 300 400 600 60 120 (60) Interest revenue from credit sales Profit before interest and tax Interest expense Profit before taxation Taxation Profit for the year 45 95 (f) The income tax rate is 33%. The entity offers extended credit terms for certain products to maintain market share in a highly competitive environment. (23) (20) (10) Giren the steady increase in the level of bank loans which has taken place in recent years, the entity has recently written to its bankers to request an increase in the lending facility. The request was received by the bank on 15 October 2016, two weeks after the financial statements were published. The bank is concerned at the steep escalation in the level of the loans and has asked for areport on the financial performance of Cigalles Ltd. for the last three STATEMENTS OF FINANCIAL POSITION AT 30 JUNE Property, plant and equipmen Inventories Trade receivables 322 620 633 278 290 540 550 12 1,392 400 492 1,182 90 Required: 1. Calculate the following ratios for the three years (show the formulae and your workings) Total assets Share capital Total equit Gross profit margin and profit margin before interest and tax 90 90 Operating costs to sales Inventory tumover Trade receivable daysl 372 Bank loans Other interest bearing borrowings Trade payables Tax payable Total liabilities and equin 520 200 20 ,392 200 Interest cover Asset turmover 4,182 4,500 1 Consider credit sales together with the related Interest revenue