Question a: Green Ltd has annual sales of 3.85 million, gross profit margin of 37%, its debtors pay on average in 60 days. The company is considering increasing the credit period given to its customers to 90 days and the financial manager estimates that all customers will take the extra credit and sales will increase by 12%., but bad debts will increase by 28,000 per year. The company pays 8% per year on its bank overdraft. Required: Decide whether the change in credit policy of Green Ltd is acceptable or not (10 marks)

Question b: Explain the relationship of nominal interest and real interest and which one should be used by companies in decision making (2 marks)

Question c: Grey Ltd has an accounts receivables turnover of 9,5 times, an inventory turnover of 3 times and payables turnover of 7 times. Required: Calculate the cash operating cycle of the company assuming the year has 365 days. (2 marks)

Question d: In 2020 Black Ltd made profit before taxation of 3.750.000, taxation was 850.000, the share capital was 3.000.000 (ordinary shares of 0.50 each) and 5.000.000 7% preference shares. Required: Calculate the earnings per share for 2020. (2 marks)