Forsythe (Pty) Limited trades in the retail clothing sector and is listed on the general retail...

         

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Forsythe (Pty) Limited trades in the retail clothing sector and is listed on the general retail sector of the Johannesburg Securities Exchange (JSE). The company focuses on young buyers. Their unaudited results for 31 December 2022 are shown below: Statement of comprehensive income for the year ended 31 December 2022 Turnover Cost of sales Opening inventory Purchases Less: Closing inventory 2022 R'000 908 191 (563 078) 120 000 657 078 (214 000) 2021 R'000 814 521 (553 874) 198 000 475 874 (120 000) Profit after tax 96 432 Statement of financial position as at 31 December 2022 EQUITY AND LIABILITIES Equity Ordinary share capital (82 million ordinary shares at R1 each) Accumulated reserves Non-current liabilities Long term loan Current liabilities Trade payables Accruals and provisions 343 876 82 000 261 876 188 386 188 386 260 359 185 269 75 090 83 948 294 876 82 000 212 876 111 579 111 579 168 702 140 174 28 528 Total equity and liabilities ASSETS Non-current assets. Current assets Inventory Trade receivables Cash balances and investments Total Assots 792 621 2022 R'000 330 187 462 434 214 000 89 669 158 765 792 621 575 157 2021 R'000 314 124 261 033 120 000 45 421 612 95 575 157 Financial ratios of Forsythe (Pty) Limited (1) (11) (iii) € (iv) (v) (vi) (vii) (viii) Ratio Gross profit percentage Net operating profit percentage Change in turnover Return on assets Return on equity Debtors collection period Inventory turnover Debt equity ratio Cash ratio 2021 32% 16,6% 10,3% 23,5% 28,5% 29,1 days 4,6 times 37,81 0,57: 1 2022 ? ? ? ? ► Additional information: The company launched a new exclusive clothing brand at the beginning of 2022 which is very popular amongst most teenagers. . The annual sales occurred evenly throughout the year. Of the turnover in 2022, 65% was credit sales. This represents a slight decrease from the 70% credit sales in 2021. The financial manager has reviewed the company's credit sales policy and intends to decrease credit sales to 55% of turnover from 2023 onwards. • All inventories are purchased on credit. A substantial part of the new clothing brand is imported from China. This inventory is ordered in large quantities to save on shipping costs. The budgeted turnover of the company is R1 089 829 000 for 2023. There are 365 days in a year and the company tax rate is 28%. You may ignore the impact of VAT. REQUIRED a) Calculate ratios (i) to (ix) for 2022 in the table above and provide possible reasons for the deterioration or improvement thereof from 2021 to 2022. Take the additional information into account for providing these reasons. Round your final answer to the nearest decimal place. TOTAL: 35 MARKS Forsythe (Pty) Limited trades in the retail clothing sector and is listed on the general retail sector of the Johannesburg Securities Exchange (JSE). The company focuses on young buyers. Their unaudited results for 31 December 2022 are shown below: Statement of comprehensive income for the year ended 31 December 2022 Turnover Cost of sales Opening inventory Purchases Less: Closing inventory 2022 R'000 908 191 (563 078) 120 000 657 078 (214 000) 2021 R'000 814 521 (553 874) 198 000 475 874 (120 000) Profit after tax 96 432 Statement of financial position as at 31 December 2022 EQUITY AND LIABILITIES Equity Ordinary share capital (82 million ordinary shares at R1 each) Accumulated reserves Non-current liabilities Long term loan Current liabilities Trade payables Accruals and provisions 343 876 82 000 261 876 188 386 188 386 260 359 185 269 75 090 83 948 294 876 82 000 212 876 111 579 111 579 168 702 140 174 28 528 Total equity and liabilities ASSETS Non-current assets. Current assets Inventory Trade receivables Cash balances and investments Total Assots 792 621 2022 R'000 330 187 462 434 214 000 89 669 158 765 792 621 575 157 2021 R'000 314 124 261 033 120 000 45 421 612 95 575 157 Financial ratios of Forsythe (Pty) Limited (1) (11) (iii) € (iv) (v) (vi) (vii) (viii) Ratio Gross profit percentage Net operating profit percentage Change in turnover Return on assets Return on equity Debtors collection period Inventory turnover Debt equity ratio Cash ratio 2021 32% 16,6% 10,3% 23,5% 28,5% 29,1 days 4,6 times 37,81 0,57: 1 2022 ? ? ? ? ► Additional information: The company launched a new exclusive clothing brand at the beginning of 2022 which is very popular amongst most teenagers. . The annual sales occurred evenly throughout the year. Of the turnover in 2022, 65% was credit sales. This represents a slight decrease from the 70% credit sales in 2021. The financial manager has reviewed the company's credit sales policy and intends to decrease credit sales to 55% of turnover from 2023 onwards. • All inventories are purchased on credit. A substantial part of the new clothing brand is imported from China. This inventory is ordered in large quantities to save on shipping costs. The budgeted turnover of the company is R1 089 829 000 for 2023. There are 365 days in a year and the company tax rate is 28%. You may ignore the impact of VAT. REQUIRED a) Calculate ratios (i) to (ix) for 2022 in the table above and provide possible reasons for the deterioration or improvement thereof from 2021 to 2022. Take the additional information into account for providing these reasons. Round your final answer to the nearest decimal place. TOTAL: 35 MARKS

Answer rating: 100% (QA)

a Financial ratios for Forsythe Pty Limited in 2022 i Gross profit percentage Gross profit Turnover x 100 908 191 563 078 908 191 x 100 380 Reason for improvement The increase in gross profit percenta... View the full answer