Question
The following three companies have asset financing structures which are considered to be aggressive, average and defensive strategists: Statement of Financial Position as at 31
The following three companies have asset financing structures which are considered to be aggressive, average and defensive strategists:
Statement of Financial Position as at 31st December, 2019 | |||
| Aggressive Ltd | Average Ltd | Defensive Ltd |
| GH000 | GH 000 | GH 000 |
Noncurrent assets | 175,000 | 125,000 | 100,000 |
Current assets | 75,000 | 125,000 | 150,000 |
Total assets | 250,000 | 250,000 | 250,000 |
Equity(100,000,000 @ Gh1) | 50,000 | 50,000 | 50,000 |
25% Debenture | 50,000 | 75,000 | 150,000 |
Current liabilities (average cost 3% pa) |
|
|
|
Bank overdraft | 150,000 | 125,000 | 50,000 |
Total equity and liabilities | 250,000 | 250,000 | 250,000 |
Notes:
- The companies finance some aspects of business operations with bank overdraft at the interest of 15% per annum.
- Each of the three companies recorded Net Profit before Interest and Taxes (EBIT) of GH80,000,000.
- Corporate tax is 25%
Required
- Describe three characteristics of the following working capital strategists listed below:
- Aggressive working capital strategy
- Average working strategy
- Moderate working strategy
Calculate the EPS for the three working capital financing strategists for the year ended December 31, 2019.
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