QUESTION 3 - MCQ (10 marks) 1. Esau Ltd has annual sales of R160m and a gross profit margin of 25%. Inventory on hand in its latest balance sheet was R30m. Days sales in inventory and inventory turnover were: a) 91.25 days; 4 times b) 273.75 days; 1.33 times c) 63.875 days; 5.71 times d) 68.44 days; 4 times e) None of the above (2) 2. Rylands company relaxes its credits standards and finds that its accounts receivable have increased by R100 000. Its variable cost is normally 60 percent of sales and the firm has substantial excess capacity. The firm has an opportunity to invest in marketable securities at a rate of 10%. Its opportunity cost in receivables from relaxing the credit standards is: a) R5000 b) R6000 c) R8000 d) R10 000 e) None of the above (2) 3. In its latest financial statements, Roman (Ltd) reflects sales of R60m, all of which are on credit. The gross profit percentage was 20%. Current assets of R18 million comprised inventory of R10m and accounts receivable of R8m. account payable was R5m. the working capital cycle, based on a 360-day year is: a) 123 days b) 85.6 days c) 108 days d) 78 days e) 135 days (2) 7 4. Using the information relevant to Roman (Ltd) above and assuming that sales are expected to increase to R69m next year which of the following are true (all other things being equal): a) Current assets will increase spontaneously to R20.7m b) Net working capital will increase spontaneously to R14.95m c) Accounts payable will increase spontaneously to R5.75m d) All of the above are true e) None of the above are true 5. If a company changes its terms of trade from 1/10, net 30 to 1/10, net 60, which of the following will not happen? (2) a) Sales will increase b) The old customers will continue to pay in 30 days c) The new customers will pay in 60 days d) Total receivables will increase e) None of the above (2)