QUESTION 2 REQUIRED Use the information provided below to answer the following questions: Comment on the...

  

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QUESTION 2 REQUIRED Use the information provided below to answer the following questions: Comment on the financial result of the company. 2.1 2.2 Is the company efficient in its collection of debts arising from credit sales? Motivate your answer by using an appropriate ratio. Will creditors allow credit under distress business conditions to Silverstone Limited? Explain your answer with the relevant ratio. Would the shareholders be happy with the profitability of the company? Use an appropriate ratio to motivate your answer. 2.3 2.4 2.5 2.6 Calculate the ratio for 2021 that reflects how the stock market is judging the company's eamings performance and prospects. Explain the impact on the cost of sales in the statement of comprehensive income if LIFO rather than FIFO method of valuing inventories is used during periods of rising prices. (20 Marks) (2 marks) (3 marks) (3 marks) (4 marks) (4 marks) (4 marks) INFORMATION Extracts of the statement of comprehensive income and statement of financial position of Silverstone Limited for 2021 and 2020 are as follows: Statement of Comprehensive Income for the year ended 31 December. Sales Cost of sales Gross prof Operating expenses Operating profit Profit before tax Profit after tax Statement of Financial Position as at 31 December: Assets Non-current assets Current assets Inventory Accounts receivable Cash and cash equivalents Total assets Equity and liabilities Shareholders' equity Non-current liabilities Current liabilities (Accounts payable only) Total equity and liabilities Note: . All purchases and sales of inventories are on credit The credit terms to debtors are 30 days. There were 2 000 000 shares in issue during 2021 The market price per share was R5.50 on 31 December 2021 2021 (R) 6400 000 4 000 000 2400 000 960 000 1440 000 1280 000 896 000 2021 (R) 7600 000 5240 000 2440 000 1 000 000 1 800 000 12 840 000 9 880 000 1600 000 1360 000 12 840 000 2020 (R) 5.440 000 3 264 000 2 176 000 1056 000 1 120 000 1040 000 728 000 2020 (R) 6400 000 4400 000 1 600 000 1680 000 1120 000 10 800 000 8 800 000 800 000 1 200 000 10 800 000 QUESTION 2 REQUIRED Use the information provided below to answer the following questions: Comment on the financial result of the company. 2.1 2.2 Is the company efficient in its collection of debts arising from credit sales? Motivate your answer by using an appropriate ratio. Will creditors allow credit under distress business conditions to Silverstone Limited? Explain your answer with the relevant ratio. Would the shareholders be happy with the profitability of the company? Use an appropriate ratio to motivate your answer. 2.3 2.4 2.5 2.6 Calculate the ratio for 2021 that reflects how the stock market is judging the company's eamings performance and prospects. Explain the impact on the cost of sales in the statement of comprehensive income if LIFO rather than FIFO method of valuing inventories is used during periods of rising prices. (20 Marks) (2 marks) (3 marks) (3 marks) (4 marks) (4 marks) (4 marks) INFORMATION Extracts of the statement of comprehensive income and statement of financial position of Silverstone Limited for 2021 and 2020 are as follows: Statement of Comprehensive Income for the year ended 31 December. Sales Cost of sales Gross prof Operating expenses Operating profit Profit before tax Profit after tax Statement of Financial Position as at 31 December: Assets Non-current assets Current assets Inventory Accounts receivable Cash and cash equivalents Total assets Equity and liabilities Shareholders' equity Non-current liabilities Current liabilities (Accounts payable only) Total equity and liabilities Note: . All purchases and sales of inventories are on credit The credit terms to debtors are 30 days. There were 2 000 000 shares in issue during 2021 The market price per share was R5.50 on 31 December 2021 2021 (R) 6400 000 4 000 000 2400 000 960 000 1440 000 1280 000 896 000 2021 (R) 7600 000 5240 000 2440 000 1 000 000 1 800 000 12 840 000 9 880 000 1600 000 1360 000 12 840 000 2020 (R) 5.440 000 3 264 000 2 176 000 1056 000 1 120 000 1040 000 728 000 2020 (R) 6400 000 4400 000 1 600 000 1680 000 1120 000 10 800 000 8 800 000 800 000 1 200 000 10 800 000

Answer rating: 100% (QA)

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