Question
Question 1 The following information relates to Windhoek Alarm Systems (WAS) for the financial years 2021 and 2020. Summarised Statement of Financial Position as at
Question 1
The following information relates to Windhoek Alarm Systems ("WAS") for the financial years 2021 and 2020.
Summarised Statement of Financial Position as at 30 November 2021 | ||
2021 | 2020 | |
N$ | N$ | |
Assets | ||
Non- current/fixed | 7 000 000 | 6 000 000 |
Inventory | 500 000 | 300 000 |
Receivables | 450 000 | 420 000 |
Cash | 650 000 | 80 000 |
Total Assets | 8 600 000 | 6 800 000 |
Equity and Liabilities | ||
Share capital (N$2 shares) | 5 000 000 | 4 400 000 |
Retained Income | 900 000 | 500 000 |
Long term Debt | 2 000 000 | 1 000 000 |
Payables | 700 00 | 900 000 |
Total equity and liabilities | 8 6000 000 | 6 800 000 |
Summarised Statement of Profit and Loss for the year ended 30 November 2021 | |
N$ | |
Sales (50% on credit) | 3 000 000 |
Cost of sales | 2 000 000 |
Depreciation | 120 000 |
Interest Expense | 80 000 |
Net Income before Tax | 900 000 |
Dividends | 330 000 |
Retained Income | 300 00 |
Additional information Shares are currently trading at N$2.30 per share. The new shares were issued at the beginning of the year. Similar businesses have a return on investment of 15%
Required
Calculate the following ratios for 2021 and comment. Ratios for 2020 are given in brackets.
Current ratio (0,89:1)
Acid test ratio (0,56:1)
The debtors collection period (81 days) [all debtors are on 60 days accounts]
Calculate the earnings per share and dividends per share for 2021. 4 14 4.3 How many shares were issued in 2021?
Calculate the market to book ratio.
Explain the significance of this ratio 4 20 4.5 Calculate the return on equity using the Du Point Identity/Formula. Will the management be happy with this return?
Question 2
Simunye Enterprises ("SE") is budgeting to sell 1 000 units of product S in the forthcoming period. The selling price per unit of S is N$50. The cost of producing one unit of S is N$25. If SE sells on credit, they will incur a collection cost of about N$1 per unit sold. The weighted average cost of capital for SE is 15%. The normal year has 365 days.
Required
Calculate the profit to the SE if:
All sales are for cash;
Sales are made on credit and customers pay within 30 days;
Sales are made on credit and a 2% discount is granted if customers pay in 10 days. 50% of the customers will take advantage of the discount.
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