REQUIRED

Use the following financial data to prepare the Pro Forma Statement of Financial Position of

Plexicor Inc. as at 31 December 2020. (10 marks)

INFORMATION

A financial manager at Plexicor Inc. has gathered the following financial data needed to a Pro Forma

Statement of Financial Position for the coming year ending 31 December 2020:

Sales for 2020 is estimated to be R7 500 000.

Trade and other receivables represent 12% of sales.

Inventory represents 24% of sales.

New equipment with a cost price of R900 000 will be purchased during 2020. Total depreciation for 2020 is

estimated to be R500 000.

Trade and other payables represent 18% of sales.

150 000 shares are expected to be issued at R2 each during the first quarter of 2020.

The business predicts a 10% profit margin (net profit margin).

Dividends amounting to R400 000 are expected to be declared at the end of 2020 and are payable during

2021.

The long-term loan is estimated to be reduced by 10% during 2020.

The amount of cash and cash equivalents must be determined (balancing figure).

The Statement of Financial Position for the year ended 31 December 2019 is as follows:

PLEXICOR INC.

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019

R

ASSETS

Non-current assets 4 100 000

Fixed/Tangible assets 4 100 000

Current assets 2 900 000

Inventories

Trade and other receivables

Cash and cash equivalents

1 800 000

900 000

200 000

Total assets 7 000 000

EQUITY AND LIABILITIES

Equity 4 600 000

Ordinary share capital

Retained earnings

3 300 000

1 300 000

Non-current liabilities 1 000 000

Long-term loan 1 000 000

Current liabilities 1 400 000

Trade and other payables 1 400 000

Total equity and liabilities 7 000 000

QUESTION 3 (20 Marks)

REQUIRED

3.1 Use the information provided below to calculate the following ratios for 2019. Where applicable, round

off answers to two decimal places.

3.1.1 Profit margin (2 marks)

3.1.2 Inventory turnover (2 marks)

3.1.3 Debtors collection period (2 marks)

3.1.4 Creditors payment period (2 marks)

3.1.5 Return on equity (2 marks)

3.1.6 Current ratio (2 marks)

3.1.7 Acid-test ratio (2 marks)

3.2 Refer to your answers in question 3.1 and comment on the ability of Taurus Limited to:

3.2.1 honour its short-term obligations without relying on the sale of its inventories. (2 marks)

3.2.2 collect debts arising from credit sales. (2 marks)

3.2.3 provide a satisfactory return for the investors. (2 marks)

INFORMATION

Excerpts of the financial data of Taurus Limited for 2019 are as follows:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019

R

Sales 7 800 000

Cost of sales (5 280 000)

Gross profit 2 520 000

Operating profit 796 000

Profit after tax 483 000

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019

Assets R

Non-current assets 2 470 000

Inventories 3 000 000

Accounts receivable 930 000

Cash 440 000

6 840 000

Equity and liabilities R

Equity 3 160 000

Long-term loan 1 280 000

Accounts payable 1 400 000

Other current liabilities 1 000 000

6 840 000

Additional information

1. All purchases and sales of inventories were on credit.

2. Inventories on 31 December 2018 amounted to R2 800 000.

3. Credit terms to debtors are 30 days.