QUESTION $2$

$(20$ Marks$)$

$2\mathrm{.}1$

REQUIRED

Use the information provided below to determine the cost $($as a percentage, expressed to two decimal places$)$ to Sibiya Stores of not accepting the discount. Assume a $360-$day year.

$(4$ marks$)$

INFORMATION

The credit terms granted by Mega Manufacturers to Sibiya Stores are $3/10$ net $60$ days.

$2\mathrm{.}2$

REQUIRED

Use the information given below to calculate the following:

$2\mathrm{.}2\mathrm{.}1$

Economic Order Quantity

$(4$ marks$)$

$2\mathrm{.}2\mathrm{.}2$

Re$-$order point.

$(3$ marks$)$

INFORMATION

The following details have been supplied by Tonga Suppliers for the only product that it sells:

Sales per month

$3000$ units

Carrying costs as a percentage of the unit purchase price

$10\%$

Purchase price per unit

R$50$

Cost of placing an order

R$25$

The time that elapses between placing an order and the receipt of the products

$12$ days

Number of days that Tonga Suppliers operates in a year

$240$ days

$2\mathrm{.}3$

REQUIRED

Use the Dividend Growth Model to estimate the cost of the ordinary shares $($expressed as a percentage to two decimal places$)$ from the information provided below.

$(4$ marks$)$

INFORMATION

The present value of a Torga Limited ordinary share is R$50,$ the dividend at the end of the previous year was R$8$ and the expected growth rate in dividends is $10\%$ p$.$a$.$

$2\mathrm{.}4$

REQUIRED

Use the information provided below to calculate the weighted average cost of capital $($expressed as a percentage to two decimal places$).$

$(5$ marks$)$

INFORMATION

The optimal capital share of Yolo Limited is $60\%$ ordinary share, $10\%$ preference share and $30\%$ debt financing. The pre$-$tax costs of capital for ordinary shares, preference shares and debt are $18\%,15\%$ and $20\%$ respectively. The tax rate is $27\%.$

QUESTION $3$

$(20$ Marks$)$

REQUIRED

Study the information provided below and prepare the following for July and August $2024.$

$3\mathrm{.}1$

Debtors Collection Schedule

$(4$ marks$)$

$3\mathrm{.}2$

Cash Budget

$(16$ marks$)$

INFORMATION

Glenville Limited is in the process of developing a cash budget for July and August $2024.$ The following information is available:

$1.$

Expected sales from May to August $2024$ are as follows:

May

R$750000$

June

R$850000$

July

R$1500000$

August

R$1000000$

$2.$

Historically $70\%$ of the company$$s sales has been on cash and the rest on credit. Twenty percent $(20\%)$ of the cash sales is subject to a discount of $10\%.$

$3.$

Sixty percent $(60\%)$ of the credit sales is usually collected in the month after the sales, thirty five percent $(35\%)$ is collected two months after the sale and the balance is written off as bad debts.

$4.$

During August $2024$ the company expects to receive a dividend of $8$ cents per share on the $70000$ shares that it holds in Camry Limited.

$5.$

The company$$s purchases of inventory are estimated to be $60\%$ of sales. Thirty percent $(30\%)$ is paid in cash and a discount of $10\%$ is receivable. The balance is paid in the month after the purchase. $($Separate entries are required for the cash purchases and payments for credit purchases.$)$

$6.$

The monthly rental, payable at the end of each month, will increase by $10\%$ with effect from $01$ August $2024.$ The rental payable on $31$ August is R$26400.$

$7.$

The fixed salary cost for $2024$ is R$420000$ and is paid evenly every month.

$8.$

Interest on loan for two months at a rate of $15\%$ per year is payable on the loan balance of R$150000$ during August $2024.$

$9.$

New machinery with a cost price of R$450000$ will be purchased and paid for during July $2024.$

$10.$

Other cash operating expenses are forecast at R$200000$ for June $2024$ and are expected to increase by $5\%$ each month.

$11.$

Cash in the bank on $30$ June $2024$ is expected to amount to R$20000.$

QUESTION $4$

$(20$ Marks$)$

REQUIRED

Use the information provided below to answer the following questions.

$4\mathrm{.}1$

Calculate the following ratios for $2023$ only. Note: Use the formulas provided in the formula sheet only $($that appear after QUESTION $5).$ Answers to the ratios must be expressed to two decimal places.

$4\mathrm{.}1\mathrm{.}1$

Inventory turnover

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}2$

Net profit margin

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}3$

Debt$-$equity

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}4$

Earnings per share

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}5$

Finance cost coverage

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}6$

Average collection period

$(2$ marks$)$

$4\mathrm{.}2$

Will the company be able to pay its short$-$term debts if business conditions are unfavourable? Motivate your answer by using an appropriate ratio.

$(4$ marks$)$

$4\mathrm{.}3$

Will the shareholders of the company be satisfied with the return on their investments? Support your answer with the use of an appropriate ratio.

$(4$ marks$)$

INFORMATION

The extracts of the financial statements of Fabrice Limited for $2022$ and $2023$ are provided below.

FABRICE LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED $31$ DECEMBER $2023$

R

Sales

$990000$

Cost of sales

$600000$

Earnings before interest and taxes

$250000$

Interest expense

$30000$

Profit before tax

$220000$

Company tax

$59400$

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER:

$2023($R$)$

$2022($R$)$

Non$-$current assets

$1368000$

$1140000$

Inventories

$360000$

$220000$

Accounts