QUESTION 3 [25 MARKS]

BJs Ltd manufactures products that are used in the construction industry. The company has been successful in the management of its working capital and liquidity. However, 2020 has been different. Calculate the working capital and liquidity ratios for BJs Ltd given the following financial information:

The following is an extract of the trading account in the income statement:

Sales

Cost of sales Gross profit

Extract from the statement of financial position

ASSETS

Current assets Inventory

Debtors (refer to note 1) Short-term investments Cash

EQUITY AND LIABILITIES Noncurrent liabilities Loans and overdrafts Taxes

Dividend

Creditors (refer to note 2)

Net current assets

Notes:

1. Amount of trade receivables in debtors amount

2. Amount of trade payables in creditors amount

2020 2019

R000 R000

2,065 1,789 (1,479) (1,304)

586 485

2020 2019

R000 R000

119 109

401 347

4 19

48 48 572 523

49 35

62 47

19 14

371 324

501 420

71 103

330 285

236 211

The company is in the manufacturing industry. Its products are used in the construction industry.

Required:

3.1 Calculate liquidity and working capital ratios. (12)

3.2 Comment on the calculated ratios. (8 marks on liquidity ratios plus 5 marks on (13) working capital ratios)

QUESTION 3 [25 MARKS] BJs Ltd manufactures products that are used in the construction industry. The company has been successful in the management of its working capital and liquidity. However, 2020 has been different. Calculate the working capital and liquidity ratios for BJs Ltd given the following financial information: The following is an extract of the trading account in the income statement: 2020 R'000 2,065 (1.479) 586 2019 R'000 1.789 (1.304 485 2020 R'000 2019 R'000 Sales Cost of sales Gross profit Extract from the statement of financial position ASSETS Current assets Inventory Debtors (refer to note 1) Short-term investments Cash EQUITY AND LIABILITIES Noncurrent liabilities Loans and overdrafts Taxes Dividend Creditors (refer note 2) 119 401 4 48 572 109 347 19 48 523 49 62 19 371 501 35 47 14 324 420 Net current assets 71 103 Notes: 1. Amount of trade receivables in debtors amount 2. Amount of trade payables in creditors amount 330 285 236 211 The company is in the manufacturing industry. Its products are used in the construction industry. Required: (12) 3.1 Calculate liquidity and working capital ratios. 3.2 Comment on the calculated ratios. (8 marks on liquidity ratios plus 5 marks on working capital ratios) (13)