The Internal Question 1 [33] TUTORIAL LETTER 1 (ASSIGNMENT 1) -2020 SECOND SEMESTER 1.1 . FMA101 FINANCIAL MANAGEMENT ! The management of Globe Travel (Pty) Lid extracted the following information from the accounting records for the financial year ending 30 June 2020: Depreciation Administration expenses Sales R25 000 Sales expenses R220 000 Cost of goods sold R3 450 000 Lease expense R180 000 Interest expense R2 550 000 R40 000 Dividends on preference shares R30 000 Dividend per ordinary share R35 000 Number of ordinary shares in issue RO.50 Page pors!) Tax rate 900 000 Required: 28% profit margin. Use the information provided to calculate the earnings per share (EPS) and the net Show all calculations. 1.2. (12) You are a business journalist reporting on the financial performance of companies, In a recent interview with the CEO of an engineering company, the CEO stated that the company is performing very well at present and because it is using the most modern engineering technology while at the same time keeping its inventory levels low. The CEO stated that the use of state-of-the-art technology coupled with low inventory levels will soon result in the company achieving high profit levels. Current ratio Pao The CEO presented the following ratio analysis to support his statements: 2017 2018 2019 2020 current lasbil. Current ratio 1.30 1.70 1.90 2.10 0.80 quick 1 10 = Quick ratio 1.20 0.50 0.40 Current asked Curnit Wit Required: Do you agree with the CEO's statement about profits? Use the information provided in the table to explain your answer. (14) 1.3. The information below was taken from a financial ratio analysis prepared by Canned Foods Ltd to assess its financial performance for 2019. Sales revenue R50 000 000 Gross profit margin 65% Operating profit margin 40% Net profit margin 6% Return on total assets 16% Return on ordinary shareholders' equity 18% 4% Total asset turnover 58 days Average collection period 365 Number of days in a year Page 2 of Assignment SBSIIA POSITION The Interna TUTORIAL LETTER 1 (ASSIGNMENT 1)- 2020 SECOND SEMESTER ssur Required: FMA101 FINANCIAL MANAGEMENT 1 following accounts: Use the ratios and other information provided to calculate the rand value for the atie 1.3.1. Gross profit 1.3.2. Cost of goods sold 1.3.3. Operating profit 1.3.4. Operating expenses 1.3.5. Profit available to ordinary shareholders 1.3.6. Total assets 1.3.7. Total shareholders' equity Show all calculations. Question 2 [32] (7) Dagmar Suppliers Lid wants to do a scenario analysis to assess possible profitability for 2021. The company will consider three different sales scenarios. The pessimistic prediction of sales is R1 350 000. is R840 000, the most likely sales are R1 125 000 and the most optimistic prediction of sales Dagmar's statement of comprehensive income for 2020 is as follows: Dagmar Suppliers Ltd Statement of comprehensive income for the year ended 31 December 2020 Rand Revenue 950 000 Less: Cost of sales 446 500 Gross profit 503 500 Less: Operating expenses 326 250 Operating profit 281 250 Finance cost 45 000 Profit before tax 177 250 Less: Income tax 53 175 Profit for the year 124 075 Required: 2.1. Apply the percentage-of-sales method to the statement of comprehensive income for 2020 to develop the pessimistic and optimistic pro-forma statements of comprehensive income for 2021. Use the table format below to prepare your answer. Items 2020 % of sales Pessimistic Optimistic (18) 2.2. Explain why the percentage-of-sales method could result in an overstatement of profits for the pessimistic scenario and an understatement of profits for the optimistic scenario. (14) Page 3 of Assignment
