Question 1 Pecasi Limited is the largest cloting retailer in South Africa and is listed on the Johannesburg Stock Exchange (JSE). The company have more than 3 000 retail stores, the majority of which are in South Africa. The recent depreciation of the rand against worlds major currencies (exacerbated by local politics, slowing economy and rising levels of unemployment) has sent the JSE share index into a downward spiral and the shareholders of Pecasi Limited have also seen a sharp decline in their investment value in the company. The statement of profit or loss and the statement of financial position of Pecasi Limited are provided below: Statement of profit or loss For the year ended 31 March 2020 R million Notes 2020 Revenue 1 23 746 Cost of merchandise (13 252) Gross profit 10 494 Other operating income 1 533 Other income 2 1 106 Trading expenses 3 (9 037) Net finance costs 4 (1 075) Profit before taxation 3 021 Taxation 6 ( 864) Profit for the year 2 157 Dividend Interim (R million) 7 382,5 Dividend Final (R million) 7 765 Weighted average number of shares (million) 207 Number of retail outlets 3 125 Staff complement 21 981 Share price closing (cents) 14 144 Statement of financial position At 31 March 2020 R million Notes 2020 Non-current assets Property, plant and equipment 3 336 Other Investments 2 4 736 Goodwill 378 Current assets Inventory 5 116 Trade and other receivables 6 695 Prepayments 946 Cash and cash equivalents 888 Total assets 22 095 Capital and reserves Share capital 890 Non-distributable reserves 237 Distributable reserves 8 774 Total equity 9 901 Non-current liabilities Long-term portion of interest-bearing debt 4 5 322 Deferred taxation 435 Post-retirement medical benefits 217 Current liabilities Short-term portion of interest-bearing debt 4 3 139 Short-term borrowings 5 1 246 Trade and other payables Total equity and liabilities 1 835 22 095 NOTES 1. 70% of the total sales made during the year were on credit. Purchases secured on credit amounted to R10 908 million. This contributes 90% of total purchases of the company. The gross profit for the 2019 financial year amounted to R9 047 million. Revenue in 2019 was 15% less than current year. 2. Other income relates to dividends received from investments (marketable securities) in listed retail companies outside the country. This has decreased by almost 4% from the previous years. 3. Trading expenses include cash operating expenses of R8 572 million and non-cash operating expenses (depreciation and amortisation) of R465 million. 4. Finance costs for the year amounted to R1 269 million and interest income received on credit bank balance was R194 million. Interest-bearing debt at 31 March 2019 was R10 877 million. 5. The short-term borrowings comprise of unsecured loans. Interest and administration costs on these loans are negligible. 6. The corporate taxation rate is 28%. Assume 365 days in 2020 (ignore the fact that 2020 is leap year). 7. The final dividend of R765 million was declared and paid at the end of the year. An interim dividend, which was half the total dividend declared for 2020 was fully paid at the end of the first half of the year. Note there were no other movements in reserves except those that are apparent from the scenario. Use the scenario above to answer questions 1 to 13 regarding the 2020 financial year. 1. Calculate the debtors collection period (days). 1. 147 2. 117 3. 168 4. 103 2. Calculate the creditors payment period (days). 1. 61 2. 51 3. 56 4. 55 3. Assuming that it takes Pecasi Limited an average of 103 days to collect from its debtors and 61 days to settle its creditors, calculate the cash conversion cycle (days). 1. 196 2. 164 3. 183 4. 154 4. Calculate the fixed asset turnover (times). 1. 0,2 2. 0,9 3. 7,1 4. 2,8 5. Calculate the cash ratio (x: 1) 1. 0,14 2. 3,06 3. 0,90 4. 0,48 6. Calculate the net interest-bearing debt to equity ratio (x: 1) 1. 0,98 2. 0,85 3. 0,76 4. 0,54 7. Calculate the return on assets (%) 1. 18,5 2. 13,5 3. 13,8 4. 13,9 8. Calculate the change in gross profit margin (%) Round your final answer to one decimal. 1. 3,8 2. (1,3) 3. (0,6) 4. 0,6 9. Calculate the dividend cover for 2020 (times) 1. 0,53 2. 1,88 3. 2,63 4. 2,82 10. Calculate the effective interest rate (%) 1. 20,2 2. 15,0 3. 11,7 4. 12,7 11. The net interest cover (times) for Pecasi Limited, taking other income into account, is 3,8 times for the year ended 31 March 2020. What does it mean? 1. The interest received is 3,8 times more than the companys finance charges; 2. The companys turnover is 3,8 times more than the companys finance charges; 3. The number of times interest received is covered by net profit after tax; 4. The number of times net finance costs is covered by earnings before interest and tax. 12. Assume there was a decrease from 2019 to 2020 in the return on assets (%) ratio. What steps can Pecasi Limited take to improve this ratio in 2021? 1. The company can purchase new assets; 2. The company can improve its turnover by increasing sales volume; 3. By claiming wear and tear on assets; 4. The company should sell off their redundant assets 13. Calculate the effective tax rate for Pecasi Limited for the year ended 31 March 2020. 1. 14% 2. 40% 3. 28% 4. 29% Use the following scenario to answer questions 14 to 20. Myride (Pty) Limited (Myride) provides shuttle services to individuals. The company was established in 2008 and prides itself with providing safe and convenient transport to its customers. Myride operates a fleet of 200 cars, and the drivers operating these cars are paid on commission, based on the revenue generated from the trips made per month. Recently, a number of drivers have been unhappy with the way the current trip allocating system works. These drivers feel that the system allocates trips unfairly. Management has looked into this system and has resolved to procure and implement a new system, called TrackMyRide (TRM). The system will be implemented and operated over five years if feasibility studies prove to it to be successful. The financial manager is however, concerned about the financial impact of the TRM. The financial manager has asked you to assist in evaluating the TRM and has provided you with the information for the project: 1. A feasibility study regarding the suitability of the TRM system for Myride (Pty) Limited was performed by an external consultant, costing R10 000. This payment was made upfront. 2. The system components will cost R2 400 000 to set up for Myride. The components cost is split over the first three years of the project, in equal instalments. 3. It will cost the company R150 000 to train the relevant staff members. The training will have to be done in the first year of the project. New staff will be hired to operate the system, at a total cost to company of R250 000 per annum. The total cost to company will be increased by 5,5% per annum for the duration of the project. 4. There will be an annual system maintenance cost estimated at R75 000 per annum. 5. An upfront working capital investment is expected to be R500 000. 6. The system will be sold at the end of the project for an amount of R300 000. 7. Myride currently generates a turnover of R15 000 000 per annum. If this project is implemented, turnover is expected to increase by 50% in the first year based on current revenue. Thereafter, this increased amount will increase by 15% annually. 8. The TRM system will see the company saving operating costs of 2% of revenue per year. 9. SARS allows a wear and tear of 25% per annum. 10. Myride has a cost of capital of 12% and the corporate tax rate applicable is 28%. 11. Cash flows take place at the end of each year, unless stated otherwise. 12. Round your answers to the nearest rand. Use the scenario above to answer questions 14 - 20 14. What is the net cash flow after tax in year zero for capital budgeting purposes? 1. (R360 000) 2. (R500 000) 3. (R367 200) 4. (R352 800) 15. Calculate the incremental revenue in year 3. 1. R2 250 000 2. R10 875 000 3. R14 756 250 4. R29 756 250 16. What would the company have spent in total on additional staff costs after tax over the five year period? 1. R1 545 272 2. R1 395 272 3. R1 112 596 4. R1 119 796 17. Calculate the recoupment/(scrapping loss) on the sale of the asset after the five year period. 1. R300 000 recoupment 2. R100 000 recoupment 3. (R100 000) scrapping loss 4. (R300 000) scrapping loss 18. How much will the saving on operating cost be for year 5? 1. R684 394 2. R450 000 3. R787 053 4. R487 053 19. Which of the following statements regarding sunk cost is true? 1. It is a cost incurred irrespective if a company will embark on a project or not. It is not a relevant cost to base the decision on whether to accept a project or not. 2. When a cost is incurred before the start of a project in order to evaluate whether the project is acceptable or not. 3. When a cost does not add value to the project, it is called a sunk cost; 4. A sunk cost will always be shown as an outflow in year zero. 20. Which statement is true: The following is considered part of working capital for a project: 1. Cash only; 2. Inventory, creditors, debtors and cash; 3. Debtors and cash; 4. Fixed assets

UO NO38% 21:35 Read Only - You can't save chang... 1 Question Pecel Limand is the largest citing waar in South Africa and telesed on the Jharrestur Stack Eachung JSE). The company have more than 3000 retail stores, the majority of which are in South ANG Thement direction of the underlager currendes carted by local posing economy and level of player) has set twee shares na owad spiral and the shareholders Peces Limited to ship dedise In this was in the Tha sabutant al profitar la and the studerart at financial position of Pacal Limited are provided below Statement of profit or loss For the year ended 31 March 2012 R Notes 2020 R 2) TO Gait of merchandise (1322) Gross profit Other operating in Oro 2 1 100 Trading POST) 11075) Proft before action 3021 1864) Prolt for the year 2197 Dividend - Inimio Didend - Person 7 Tos Weighted average number of share on 201 Number of roles Sta complet 21981 Shore pron-dosing cents 1494 25 1418 Statement of financial position A131 March 2020 MACS 2020 Rwillen Non-current Property, plant and equipment Othernet 3330 4738 2 UO NO 38% D21:35 MAC3702_As...emester 2(3) - Read-only Read Only - You can't save chang.. MAC37cment Notes 2020 Rmillion Noncurrentes Property plant and equipment Other investments Goodwill 3336 2 378 5116 BS Current mentory Trade ind other recibir Prepayments Cash and cash equivalents Total assets 888 Capital and reserves Share cap Non-corbutables Distributable reserves Total equity 30 237 8774 9901 Non-current bitte Long term portion of interest bearing debt Deferred tation Posteiroment medical benefits 5322 435 217 Current liabilities Short-term portion of interess-bearing datt Short-term borrowing Trade and other Total equity and liabilities $130 1200 11 22 05 NOTES 1. Us of the total demande during the year wars on credit Purchase acred on credit amounted to R10 908 milion. This contributes 90% of total purchases of the company The gross profit for the 2019 financial year amounted to R9 047 million Revenue in 2019 was 15% less than current year 2 Other Income rites to dividends received from investments marotable souties in dal companies in the country. This used by cats from the previous years UO NO 38% D21:35 MAC3702_As...emester 2(3) - Read-only Read Only - You can't save chang... MACSTO Tracing expenses include cash operating expenses of RB 572 milion and non-cash operating expenses depreciation and amortisation of R465 milion 4. Finance costs for the year mounted to R129 million and interest incorrosived on Credit Bank balance was R194 milion Interbaring det 31 March 2019 wit 110 877 milion The short-term borrowing comprise of secured loans Interest and administration costs on the lunargli & The corporate bacation rate is 28%. Assume 365 days in 2020 [ignore the fact that 2020 is 7. The final dividend of 765 million was declared and paid at the end of the year. An interim dividend, which was half the total dividend declared for 2020 was fully paid at the end of the first half of the year Note there were no other movements in seves compt those that are apparent from the . Use the scenarie above to answer questions 1 to 13 regarding the 2020 financial yea 1. Calculate the debtors' collection period (days. 1 472 150 4.103 2. Calculate the credit payment period chal 6 12.51 3.56 3. Assuming that it takes Pecah Limited an average of 100 days to collect from its debtors and 61 days to setfe is creditors. calculate the cash conversion cycle (days) 1 962 1 163 4. 154 4 Calculate the food mowers) 1. 0.22 0,937,1 UO NO 38% D21:36 MAC3702_As...emester 2(3) - Read-only Read Only - You can't save chang... MAC3702am 5. Calculate the cash ratio : 1) 1.0.14 23.06 3.0,90 4.0,48 8. Calculate the net interest-bearing debt to equity ratio (3:1) 1. 0,90 2 0.85 3.0,76 4.0,54 Calculate the retum on asets) 7 1. 18.5 2 13,5 3 13.8 4.139 8. Calculate the change in gross profit margin(%Round your finanswer to che ci 1.38 2. (1,3) 3. (0,61 4. 0,6 9. Calculate the dividend cover for 2020 (smes) 1. 0,53 2 1.88 2.2,63 10. Calculate the active interest rate) 1. 202 2 15.03. 11.74 12.7 11. The net interest cover (times) for Pecast Limited taking other Income into accou 30 mes for the year ended 31 March 2020. What does it mean? 1. The interest received is 3,8 times more than the company's finance charges 2. The company's bumover is 3.8 times more than the company's chang 3. The number of times interest received is covered by net profitabierta 4. The number of times net finance cos is covered by coming before intero 12. Assume there was a decrease from 2019 2020 in the retum on 3 (') ratio What stops can Poca Limited take to improve this ratio in 2021? 1 The company can purchase news 2. The company can improve its tumover by increasing sales volume 2. By claiming war and tear one 4. The company should sell off their redundante 13. Calculate the effective tax rate for Pecas Limited for the year ended 31 March 2020 IO NO 38% D21:36 MAC3702_As...emester 2(3) - Read-only . Read Only - You can't save chang... MC97021 4.28 5. Calculate 11 1. 0,14 2.3.06 3.0.60 4.0.48 & Calculate the nec interest-bearing dabeto to equily rooo 1. 0,98 2 0,852.0.78 7. Calculate the return on asets/%) 1. 18.52 13.53.13.8 4.139 2. Calculate the change in gross profit margin (X Round your final ar to one decimal 1.38 3 10,6) 4. 06 9. Calculate the dividend cover for 2020 s) 1. 0,53 2 1883.260 10. Calculate the effective interest 1. 2122 1502. 11,74 12.7 11. The net interest cover (time) for Peas Limited, ing the income" im account, is 36 times for the year ended 31 March 20120. What does maan? 1. The interest received is 3 times more than the company's accorgers 2. The comparty a tumoristim more than the finance 3. The number of times interest received is covered by net poft har tax 4. The number of times netrance costs is covered by comingsbesture Interest and 12. Assure there was a decrease from 2019 2020 in the retum on [%) ratio. What steps con Pecasi Uimited take to improve this af in 2021? 1. The company can purchases 2. The company can improve its tumower by increasing sales volume 3 By claiming wear and tear on a 4. The company should all of their reducere 13. Calculate the effective tax rate for Pecas Limited for the year ended 31 March 2020 UO NO 38% D21:36 MAC3702_As...emester 2(3) - Read-only Read Only - You can't save chang... MASO 1. 9% 20% 21% 4.29% Use the following scenario to awer questions 14 to 20 Myride (Pty) Limited (Myride provides shuthe services individuals. The company was bed in 2008 and prices with providing and convenient raport bota me Myride operates a fost of 200 cars, and the driver operating these can aspald on commission, and on the roue generated from the trip made per month Partly, autof drivers have been unhappy with the way the cument trip locating system works. These reason that the system alles trips untity Maragerners hos looked into this system and has resolved to procure and implement system called TrackMy Ride (TM). The system wilbe implemented and operated over five years feasibility studies prove to it to be successful The financial manager is however, concurred out the financial impact of the To The franchi manager has asked you to main walating the TRM and has provide you with the intention for the project 1. Ality study regarding the stability of the Toys for Myndir Limited was performed by an el conton cong R10 000. This payment 'W Funchy urhart 2 The system components will cost 400.000 tot up for Myride. The components cost is split over the first three years of the project in equal installments. 2 twill cost the company R150 000 to vain the relevant stall members. The training will have to be done in the first year of the project. Maiata will be hired to parada the molto company of 20000 per mum. The lata compary will begin by ..pranum for the duration of the project There will be an analyserairan ini terutand at RT 000 per mu 5 Anuption working capital instant is expected to be RC0000 6. The system will be sold at the end of the project for an amount of R300 000 7. Myride currently generates a tumover of R15 000 000 per annum. If this project is implemented, tumover is expected to increase by 50% in the first year based on current revenue. Thereater this incredamount will increase by 15% annually & The Map will the companying operating of 2% al een per your & SARS allows a wear and tear of 25% permum 10. Myride has a cost of capital of 12% and the corporate tax rate applicable is 28% 11. Cash flows take place at the end of each year, unless stated otherwise 12. Round your arms to the nearest rand. O NO 38% D 21:36 Read Only - You can't save chang... MACBO2mat1 Use the scenario above to www guestions 18-20 14. What is the net cash flow ator tax in year 200 for capital budgeting purposes? 1. R360 000 2 R500 000). (R367 200 4. R2 800 15 Calaise the increment en un in your 1. R2 250 000 2 R10875000 3 R14 758250 4. R29 758 250 16. What would the company have spent in total on additional staff Coos arter tax over the five year period 1. R1545 212 2.1 272 3 R1 112 4. R1 119 795 17 Calon the recensing on the sale of the asset her the five year period 1. R300 000 rocool 2 R100 000 rpm 3R00000 songs 4. R300 000 songs 18. How much will the pering on bar for years? 1. FO384 34 2. R450 000 787053 4. R487053 19. Which of the following statements regarding surik ezit is true? 1. It is a customed respecte acompany wil start on a project or not. It is not a rabartcost to be the diction on whether to cal a project or not 2. When a cost is incurred before the start of a project in order to whether the project is cobierno When ass does not add value to the procede a calada aurk.cout 4. Asunk cost will always be shown as an outlow in year 200 Which tenis tum The following is considered part of working capital for a prod: MUNC.37021 1. Cash only 2 Inventory, creditors, debtors and cash 3 Debtors and cash 4. Fou