T BUSINESS SCHOOL (RBS) JANUARY 2021 16 9.1.2 SHORT-TERM FINANCIAL MANAGEMENT [100] QUESTION ONE [25] The financial statements of Crafters Limited is presented below: CRAFTERS LTD STATEMENT OF FINANCIAL POSITION As at 29 February 2020 29 February 28 February Notes 2020 2019 ASSETS R R Non-current assets 1 146 000 1 254 000 Property, plant and equipment 996 000 1134 000 Investments (listed shares) 150 000 120 000 Current assets 834 000 975 000 Cash and cash equivalents 48000 - Inventory 480000 750000 Accounts receivable 306000 225000 Total assets 1980000 2229000 EQUITY AND LIABILITIES Equity and reserves 1 134 000 996 000 Share capital 600000 600000 Preference share capital 180000 180000 Share premium 60000 60000 Retained earnings 294,000 156,000 Non current liabilities 300 000 240 000 15% Debentures 300000 240000 ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT ACADEMIC AND ASSESSMENT CALENDAR DISTANCE REGENT BUSINESS SCHOOL (RBS) JANUARY 2021 17 Current liabilities 546 000 993 000 Bank overdraft - 330 000 Dividends payable 24 000 18 000 Accounts payable 522 000 645 000 Total equity and liabilities 1,980,000 2,229,000 ADDITIONAL INFORMATION: 1. Earnings before interest and taxation amounted to R 156 000 (2019 : R125 000) 2. The following balances are available for 28 February 2019: Inventory R630 000 Accounts receivable R400 000 Accounts payable R575 000 3. Turnover for the year ended February 2020 amounted to R12 000 000 (2019: R10 000 000). The gross profit percentage is 25%. 4. Half of turnover (50 %) is credit sales and 75% of purchases are credit purchases. REQUIRED: Prepare the following ratios for 2020 and comment on the ratios calculated using the ratios for 2019 {presented in brackets}: - 1. Debt ratio {2019: 0,55: 1} (6) 2. Current ratio {2019: 0,98: 1} (2) 3. Quick ratio {2019: 0,22: 1} (2) 4. Debt/equity ratio {2019: 1,24: 1} (4) ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT ACADEMIC AND ASSESSMENT CALENDAR DISTANCE REGENT BUSINESS SCHOOL (RBS) JANUARY 2021 18 5. Debtors collection period {23 days} (3) 6. Creditors collection period {39 days} (4) 7. Solvency ratio {2019: 1,8:1} (4)