QUESTION 2

Use the information given below to answer the following questions. Where applicable, express answers to ratios to two decimal places.

2.1 Will the company be able to fund its short-term obligations if inventories are not sold? Motivate your answer. 2.1 (3 marks)

2.3 The directors are considering financing the expansion of the company by taking out a long-term loan. With the use of the relevant ratios advise whether this would be appropriate for the company. 2.2 (6 marks)

2.3 Comment on the dividend payout rate of the company. (2 marks)

2.4Calculate the cost (as a percentage) to Satner Limited of not accepting discounts from creditors in settlement of accounts. (3 marks)

2.5 As a shareholder would you be satisfied with the profitability of the company? Motivate your answer. (3 marks)

2.6 Is the companys collection policy effective? Justify your answer. (3 marks)

INFORMATION

SATNER LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021

	R
Sales	1574 800
Cost of sales	(812600)
Gross profit	762 200
Operating expenses	(420 680)
Operating profit	341 520
Interest expense	(56 820)
Profit before tax	284 700
Company tax	(85 4100
Net profit after tax	199 290

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021

ASSETS	R
Non-current assets	783 000
Current assets:	606 600
Inventories Accounts receivable Cash and cash equivalents	203 000 277 800 125 800
Total assets	1 389 600
Equity and liabilities
Shareholders equity	628 900
Non-current liabilities (15%)	378 800
Current liabilities	381 900
Accounts payable Other current liabilities	100 800 281 100
Total equity and liabilities	1 389 600

Note:

1. Inventories as at 31 December 2020 amounted to R185 000.

2. All purchases and sales are on credit.

3. Credit terms to debtors are 30 days.

4. Credit terms of 3/10 net 90 days are granted by creditors.

5. Dividends for the year amounted to R139 503