You are Professional Accountant $($SA$)$ for registered accountants. A client of yours in the SME sector is speculating shares on listed company on the JSE. The detail and name of the listed company is confidential at this stage and this is the information that you have been provided with

$1.$ The company was founded some years ago and operates as a chain of specialist stores selling stationery, clothing and crockery and home ware on credit.

$2.$ From January $2008$ to present date, the shares have doubled in price and the market in general appears to be most impressed with the performance of the economy.

$3.$ The growth in the share price has been accompanied by growth in the number of stores that have been opened or acquired through the take over of SMEs operating in the same market.

$4.$ Extracts from the annual financial statements of the are as follows:

Statement of Financial Position at $31$ December

$20122013$

Equity and liabilities:

Issued shared capital $147834147834$

Retained income $10019282275$

Equity attributable to ordinary shares $248026230109$

Non$-$current liabilities

Long term loans $237652108297$

Current Liabilities $14814156390$

Creditors $13073244784$

Shareholders for dividends $1740911606$

Bank Overdraft $00$

Total Equity and liabilities $633816394796$

Assets

Non$-$current assets

Property, plant and equip $1606914696$

Current Assets $617750380100$

Inventory $192085149002$

Trade & other receivables $425665229633$

Cash and bank balances $01465$

Total assets $633819394796$

Statement of Profit and Loss and Other Comprehensive Income for the years ended $31$ December

$20242023$

Turnover $1287052934052$

Operating Profit $13734281768$

Net Finance Cost $3926420862$

Operating Profit before taxation $9807860906$

Income tax expense $70273048$

Profit for the Year $9105157858$

Operating profit includes Depreciation and loss on sale of fixed asset $35022237$

Required:

a$)$ Prepare the cash flows from operating activities for the company for $2024$ using the available information

b$)$ Perform a financial review of the company based on calculating the following financial ratios and explain how it may be interpreted.

Debt equity ratio

Times interest earned

Current ratio

Debtors average collection period

Inventory turnover

Your answer should include an overall assessment of the company

c$)$ List the audit steps to verify the existence of inventory

Answer rating: 100% (QA)

a Preparing the Cash Flows from Operating Activities for 2024 Cash Flows from Operating Activities Profit for the Year 910515 Adjustments for Depreciation and loss on sale of fixed assets 35022 Net Fi... View the full answer