Mzansi Magic Ltd has the following balance sheet and income statement. Please use the financial statement to
Question:
Mzansi Magic Ltd has the following balance sheet and income statement. Please use the financial statement to answer the following questions.
Mzansi Magic Ltd.
2019 Income Statement
Net sales R10 300
Less: Cost of goods sold 7 400
Less: Depreciation 1 500
PBIT 1 400
Less: Interest paid 340
PBT R 1 060
Less: Taxes 371
NPAT R 689
Dividends R310,05
Addition to retained profits R378,95
Mzansi Magic Ltd.
2019 Balance Sheet
Ordinary shares
R5 300
Net non-current assets
R12 360
Retained profits
3 770
Inventory
930
Accounts payable
1 010
Accounts receivable
750
Long-term debt
4 800
Cash
840
Total equity and liabilities
R14 880
Total assets
R14 880
All costs and net working capital vary directly with sales. Sales are projected to increase by 7 per cent. What is the projected increase in accounts payable? (1 mark)
The profit margin, the debt-equity ratio, and the dividend payout ratio are constant. Sales are expected to increase by R875,50 next year. What is the projected addition to retained profits for next year? (1 mark)
Assume that Mzansi Magic Ltd. is operating at full capacity. Also assume that all costs, net working capital, and non-current assets vary directly with sales. The debt-equity ratio and the dividend payout ratio are constant. What is the projected increase in total assets if sales are projected to increase by 12 per cent? (1 mark)
Assume that Mzansi Magic Ltd. is operating at full capacity. Also assume that assets and costs vary directly with sales but liabilities do not. The dividend payout ratio is constant. What is the external financing need if sales increase by 8 per cent? (2 marks)
Mzansi Magic Ltd. is projecting sales to increase by 5 per cent next year and the profit margin to remain constant. The firm wants to increase the dividend payout ratio by 10 per cent. What is the amount of the projected addition to retained profits for next year? (2 marks)
What is the internal growth rate of Mzansi Magic Ltd. if the dividend payout ratio remains constant? (2 marks)
Expert Answer:
What is the projected increase in accounts payable if sales are projected to increase by 7 To calculate the projected increase in accounts payable we can use the information that all costs and net wor... View the full answer
