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Question 1

The following financial statements are for Khudu Store for the year ended 31 December 2019.
Income statement for the period ended 31 December 2019
Pula Pula
Sales 500 000
Opening stock 25 000
Purchases 305 000
330 000
Less closing stock 30 000
Cost of sales 300 000
Gross profit 200 000
Operating cost 60 000
Finance cost 24 000
Profit before tax 116 000
Taxation 0
Profit for the year 116 000
Retained profit b/f 160 000
Retained profit 276 000
c/d

Khudu Store balance sheet as at 31 December 2019

Pula Pula
Property plant and 540 000
equipment
Current assets
Inventory 25 000
Receivables 62 500
Bank 12 000 99 500
Total assets 639 500
Share capital and liabilities
Share capital 125 625
Retained profits 256 000
381 625
Non- current liabilities
Debentures 200 000
Current liabilities
Payables 37 875
Proposed dividends 20 000 57 875
Total capital and liabilities 639 500
Required to calculate the following:
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a) Gross profit ratio

b) Net profit ratio
c) Current ratio
d) Acid test ratio
e) Credit collection period (days)
f) Stock turnover
B) The industry current ratio is 3 and acid test ratio is 2. How does this company compare with the
industry in terms of liquidity?

Question 2

The following are financial statements for Red Brick Limited and Blue Water Limited for the year to 31
March 2017:

Income Statement for the year ended 31 March 2017

Red Brick Blue Water
Limited
Limited

P000 P000

Sales revenue 760 430

Cost of sales (550) (350)
Gross profit 210 80
Operating expenses (86) (24)
Profit from operation 124 56
Interest on Debentures (10) (24)
Profit before tax 114 32
Provision for tax (36) (12)
Profit for the year 78 20

Additional information available regarding the appropriation of profits of the companies

for the year ending 31 March 2017
Red Brick Blue Water
Limited Limited
P000 P000
Retained earnings 31 March 2016 68 8
Profit for the year 78 20
Transferred to General Reserve (10) (5)
Proposed dividends (25) (10)
Retained earnings 31 March 2017 70 15
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Statement of financial position as at 31 March 2017

Red brick Limited Blues Water Limited
P000 P000 P000 P000
Non-current assets:
Property, plant and equipment 480 340

Current Assets
Inventories 140 80
Trade Receivables 80 40
Cash and bank 30 250 10 130
Total Assets 730 470

Share Capital & Reserves

Ordinary Share Capital (50t per share) 300 100
General Reserve 80 35
Retained earnings 70 450 15 150

Non-current Liability:
12% Debentures 100 200

Current Liabilities
Trade Payables 144 108
Provision for tax 36 180 12 120
Total Equity & Liabilities 730 470

Required to:

(a) Calculate the ratios given below for each of the two companies:
(i) Return on capital employed
(ii) Gross Profit percentage on sales
(iii) Accounts Receivable Collection period
(iv) Accounts Payables Payment period
(v) Current ratio
(vi) Quick / Acid test ratio
(vii) Capital gearing ratio
(viii) Debt ratio
(ix) Stock turn over ratio
(b) Comment on the liquidity position of the two companies for the year ending 31 March
2017.
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Question 3
The income statement and balance sheet for Rama Ltd for the year ended 31 March 2017 are given below
Income statement for the year ended 31 March 2017
Pula
Revenue 551 000
Cost of sales (379 100)
Gross profit 171 900
Distribution expenses (27 000)
Administration expenses (63 000)
Profit from operation 81 900
Finance charge (6 500)
Profit before tax 75 400
Tax (7 540)
Profit for the year 67 860

Statement of financial position as at 31 March 2017

Pula
Assets:
Non-current assets: Required to calculate the following ratios: Current ratio, acid
Property, plant and Equipment 661 500 test/ quick ratio, return on capital employed, stock turnover,
Current assets: debtor days, debt ratio.
Inventory 72 000
Trade receivables 49 400
Bank balance 5 000
Total current assets 126 400
Total assets 787 900
Equity and liabilities Question 4
Share capital and reserve The income statements of Bana Ltd and Tawana Ltd for the
Share Capital 320 000 year ended 30 June 2019 are as follows:
Share premium 120 000 Income statement for Bana Ltd
General reserve 200 860 Tawana Ltd
640 860
Non-current liability 65 000
Current liabilities
Trade payables 36 000
Taxation 7 540
Dividends 32 000
Interest on borrowings 6 500
Total current liabilities 82 040
Total equity and liabilities 787 900
Pula Pula Pula Pula
Sales 325 000 208 000
Less cost of sales:
Opening stock 117 39 000
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Purchases 000 156

273 000
000
390 195
000 000
Less closing stock 143 247 000 65 000 130 000
000
78 000 78 000
Less expenses 45 500 36 400
Net profit 32 500 41 600
Less appropriations::
General reserve 2 600 2 600
Dividend 25 000 27 600 20 000 22 600
Retained profit for the 4 900 19 000
year

Statement of financial position as at as at 30/6/19

Bana Ltd Tawana Ltd
Pula Pula Pula Pula
Non-current assets :
Plant and machinery at cost 26 000 6 500
Less accumulated depreciation 10 400 15 600 2 600 3 900
Motor vehicle 39 000 26 000
Less accumulated depreciation 15 600 23 400 9 100 16 900
39 000 20 800
Current assets
Inventory 143 65 000
000
Trade Receivables 81 250 26 000
Cash at bank 9 750 234 000 13 000 104 000
Total assets 273 000 124 800
Equity and liabilities
Share capital 130 000 65 000
Reserves 9 100 15 600
Profit and loss 16 900 23 400
156 000 104 000
Current Liabilities
Trade payables 117 000 20 800
Total equity and liability 273 000 124 800
Calculate the following ratios for each of the two companies:
Gross profit, net profit, return on capital employed, Expenses as a percentage of sales, creditor’s
collection period, Stock turnover; Aid test ratio, current ratio; debtors collection period, debt ratio.
Comment on the performance of the two companies.

Question 5
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The following are financial statements for Balang Ltd .

Balang Ltd Statement of Comprehensive Income for the year ended 31 March 2020
Pula
Sales 3372 000
Cost of sales 2016 000
Gross profit 1356 000
Operating 360 000
expenses
Operating profit 996 000
Finance cost 171 000
Profit before tax 825 000
Taxation 274 500
Profit for the year 550 500
Balang Ltd Statement of Financial Position as at 31 March 2020
Pula
Non-current assets
Property plant and 4 096 500
equipment
Current assets
Inventory 589 500
Trade receivables 247 500
Bank 126 000
963 000
Total assets 5 059 500
Equity and liabilities
Equity 750 000
Retained profit 2 698 500
3 448 500
Non-current liabilities
Loan 796 500
Current liabilities
Trade payables 814 500
Total capital and liabilities 5 059 500
Additional information:
The average ratios for the industry are as follows:
Current ratio 1.5
Acid test ratio 0.9
Inventory/stock turnover 73 days
Trade receivables/debtors collection period 26 days
Trade payable/ creditors collection period
Total asset turnover 0.7 times
Return on equity 17%
Gross profit ratio/margin 46%
Return on capital employed 24%
Debt ratio 20%
You are required to calculate the ratios for Balang Ltd which corresponds to the industrial average given
above.
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