(10 MARKS) QUESTION 1 Study the ensuing financial statement and answer the questions that follow. Statement of financial position Assets 2015 2014 Property, plant and equipment (PPE) at cost price 150.000 130 000 Accumulated depreciation (50 000) (45 000) PPE at carrying value 100 000 85 000 Share investments 20 000 15 000 Non-current assets 120 000 100 000 Inventories 10 000 6 500 Trade receivables 14 000 15 500 Cash and cash equivalents 15 400 7 000 Prepayments 600 1.000 Current assets 40 000 30 000 Total assets 160 000 130 000 Equity and liabilities Share capital 45 000 40 000 Reserves 6 000 6 000 Retained earnings 22 000 14 000 Ordinary shareholders' equity 73 000 60 000 Preference shares 15 000 10 000 Shareholders' equity 88 000 70 000 Total equity 88 000 70 000 Long-term debt 49 000 40.000 Deferred tax liability 5.000 3 000 Non-current liabilities 54 000 43 000 Trade payables 6 000 8 000 Tax payable 2 200 2 400 Dividends payable Bank overdraft Current liabilities 2 800 1 600 7 000 5000 18 000 17 000 Total equity and liabilities 160 000 130 000 Based on the information provided in the statement of financial position: 1.1 By how much did property, plant and equipment (PPE) change in 2015? 1.2 How much depreciation is attributable to 2015? 1.3 What is the change in inventories? 1.4 What is the change in trade receivables? 1.5 Obligations to suppliers changed by how much? C C (2 Marks each) Question 2 Excerpts of financial data for Polar Enterprises are as follows: Statement of Comprehensive Income 20.10 (R) 32 011 500 26 180 100 Sales (10% credit) Cost of sales (10% credit purchases) Operating profit 1 931 200 Profit before tax 1 831 400 Tax (25%) 457 850 Profit after tax Statement of Financial Position Non-current assets 1 373 550 (77 Marks) 20.9 (R) 19 373 000 15 993 700 1 327 800 1 226 420 306 600 919 820 20.9 4 700 000 20.10 5 200 000 Current assets 2 866 530 4 974 530 Inventories Accounts receivable 1 482 200 2 038 860 261 290 155 200 Marketable securities Cash 326 950 2 306 440 796 090 474 030 Current liabilities 1 088 860 588 310 Accounts payable 190 660 192 040 Other current liabilities 898 200 396 270 Required 2.1 Calculate the gross profit margin, operating profit margin and net profit margin for 20.10 and 20.9. (18 marks) 2.2 Comment on your answers calculated in question 2.1. (8 marks) 2.3 Calculate the current ratio and acid test ratio at the end of each year. How has the enterprise's liquidity changed over this period? (18 marks) 2.4 Compute the following for 20.10 (ratios for 20.9 are given in brackets): (23 marks) 2.4.1 Inventory turnover (20.9: 9.04 times) (6 marks) 2.4.2 Debtors collection period (20.9: 29.24 days) (3 marks) 2.4.3 Creditors payment period (20.9: 42.40 days) 2.4.4 Turnover to net assets (20.9 2.13) 2.5 What is your interpretation of the enterprise's performance with respect to your answers in question 2.4.4? (10 marks) (9 marks) (5 marks) Question 3 (13 marks) The following information relates to two capital expenditure projects. Because of capital rationing, only one project can be accepted. Initial cost Expected life Expected scrap value Expected net cash inflows: End of year 1 Project A R800 000 Project B R920 000 5 years R60 000 5 years R40 000 R 320 000 R 400 000 2 280 000 280 000 3 260 000 200 000 4 240 000 200 000 5 220 000 200 000 HODERITOR Question 3 (13 marks) The following information relates to two capital expenditure projects. Because of capital rationing, only one project can be accepted. Initial cost Expected life Expected scrap value Expected net cash inflows: End of year 1 R800 000 Project A Project B R920 000 5 years R60 000 5 years R40 000 R 320 000 R 400 000 280 000 baline EXAMINER 2 280 000 3 260 000 200 000 4 240 000 200 000 5 220 000 200 000 Page 5 of 7 MODERATOR Faculty of Management Sciences Department-Business Support Studies: Project Management Central University of Technology, Free State The company estimates its cost of capital is 12%. Depreciation is calculated using the straight-line method. Required 3.1 Calculate the payback period for project B. (Answer expressed in years and months) (10 marks) 3.2 Calculate the accounting rate of return for project A. (Answer expressed to 2 decimal places)