Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
You are provided with the following summarised information relating to Virgo Limited, a wheel caps and rims distributor: Statement of Financial Position ( balance sheet
You are provided with the following summarised information relating to Virgo Limited, a wheel caps and rims distributor: Statement of Financial Position balance sheet as at December : R Assets Noncurrent assets Cash Inventory Trade debtors TOTAL ASSETS Equity Shareholders Equity Liabilities Long term loan pa Accounts payable Dividends payable TOTAL EQUITY AND LIABILITIES Statement of Comprehensive Income income statement as at December : R Sales Less Cost of Sales Gross Profit Operating profit Interest expense Profit before tax Income taxation Net profit for the year Additional Information: All purchases and sales of inventories are on credit. Inventories on December amounted to R The authorised share capital consists of shares of which were issued. Interim dividends paid during the year amounted to R The shares of Virgo Limited were trading at cents per share on the stocksecurities exchange on December The following ratios are available as at December and : Debtors collection period days days Return on equity Inventory turnover rate times times Acid test ratio : : Debt to Equity Current ratio : Creditors payment period days Required: Use the information provided above to calculate the following ratios for Where applicable, round off answers to two decimal places. Turnover to net assets Creditor payment period Earnings retention ratio Return on capital employed Price earnings ratio Current ratio Using the ratios calculated in question and the ratios provided in the additional information to answer the following questions: Comment on the liquidity and working capital management of the company. Use two appropriate ratios to advise Virgo Limited whether it should increase its long term loan in order to expand its operations in the next year.
You are provided with the following summarised information relating to Virgo Limited, a wheel caps and rims distributor:
Statement of Financial Position balance sheet as at December :
R
Assets
Noncurrent assets
Cash
Inventory
Trade debtors
TOTAL ASSETS
Equity
Shareholders Equity
Liabilities
Long term loan pa
Accounts payable
Dividends payable
TOTAL EQUITY AND LIABILITIES
Statement of Comprehensive Income income statement as at December :
R
Sales
Less Cost of Sales
Gross Profit
Operating profit
Interest expense
Profit before tax
Income taxation
Net profit for the year
Additional Information:
All purchases and sales of inventories are on credit. Inventories on December amounted to R
The authorised share capital consists of shares of which were issued.
Interim dividends paid during the year amounted to R
The shares of Virgo Limited were trading at cents per share on the stocksecurities exchange on December
The following ratios are available as at December and :
Debtors collection period
days
days
Return on equity
Inventory turnover rate
times
times
Acid test ratio
:
:
Debt to Equity
Current ratio
:
Creditors payment period
days
Required:
Use the information provided above to calculate the following ratios for Where applicable, round off answers to two decimal places.
Turnover to net assets
Creditor payment period
Earnings retention ratio
Return on capital employed
Price earnings ratio
Current ratio
Using the ratios calculated in question and the ratios provided in the additional information to answer the following questions:
Comment on the liquidity and working capital management of the company.
Use two appropriate ratios to advise Virgo Limited whether it should increase its long term loan in order to expand its operations in the next year.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started