QUESTION 1 (25 Marks) REQUIRED

Study the Statement of Financial Position as at 31 December 2021 and 2020 before answering the following questions:

1.1 Calculate the amount that would be reflected as Working capital changes in the Statement of Cash Flows for the year ended 31 December 2021. (4 marks)

1.2 Did the company expand its operations during 2021? Motivate your answer. (3 marks)

1.3 Is the long-term loan correctly disclosed in the Statement of Financial Position? Explain. (2 marks)

1.4 Is the company in good financial health? Motivate your answer by referring to at least SIX (6) items on the statement. Ratios are not required. (12 marks)

1.5 Calculate the ratios (expressed to two decimal places) that would reflect the following:

1.5.1 A measure of the companys ability to settle its short-term obligations within twelve months. (2 marks)

1.5.2 A measure of the amount of total assets that are financed by creditors instead of investors. (2 marks)

INFORMATION Lomax Ltd commenced operations at the start of 2020 manufacturing only standard-sized bricks for the building industry. Its financial position at the end of 2020 and 2021 is evident in the statements provided below:

LOMAX LTD STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:

2021 2020

	2021	2020
ASSETS
Non-current assets
Property, plant and equipment (Cost)	??	??
Accumulated depreciation	(500 000)	(365 000)
Carrying value	??	??
Investment	2 700 000	3 150 000
CURRENT ASSETS
Inventories	193 500	29 000
Accounts Receivables	1 300 000	1 100 000
Cash	235 000	194 500
TOTAL ASSETS	6 500 000	6 680 000
EQUITY AND LIABILITIES
Share Capital	745 000	630 000
Retained earnings	2 380 000	4 450 000
Shareholders equity	3 125 000	5 080 000
Non Current Liabilities
Long Term Loan	2 580 000	880 000
Current Liabilities
Accounts Payable	95 000	120 000
Other Current Liabilities	700 000	600 000
TOTAL	6 500 000	6 680 000

Note

1. There was no significant change in the sales figures over the two-year period.

2. R240 000 of the long-term loan is expected to be repaid during 2022.