TUTORIAL LETTER 1 (ASSIGNMENT 1) - 2020 SECOND SEMESTER FMA 101 FINANCIAL MANAGEMENT Question 1 [33] 1.1. The management of Globe Travel (Pty) Ltd extracted the following information from the accounting records for the financial year ending 30 June 2020: Depreciation R25 000 Administration expenses R220 000 Sales R3 450 000 Sales expenses R180 000 Cost of goods sold R2 550 000 Lease expense R40 000 Interest expense R30 000 R35 000 Dividends on preference shares R0.50 Dividend per ordinary share 900 000 Number of ordinary shares in issue 28% Tax rate Required: Use the information provided to calculate the earnings per share (EPS) and the net profit margin. Show all calculations. (12) 1.2. 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. The CEO presented the following ratio analysis to support his statements: 2017 2018 2019 2020 1.30 1.70 Current ratio 1.90 2.10 1.20 0.80 0.50 Quick ratio 0.40 Required: Do you agree with the CEO's statement about profits? Use the information provided in the table to explain your answer. (14) 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% Total asset turnover 4% Average collection period 365 1.3 Number of days in a year 58 days