QUESTION 3 HAS FOUR PARTS (A, B, C, D) FOR A TOTAL OF 32 MARKS

Aplus Pte. Ltd. is a multinational corporation based in Singapore with a subsidiary, Cminus Ltd., operating in Australia. The CFO of Cminus has prepared the financial statements, reported in Australian dollars (AUD), to analyze the effects of how a choice of functional currency would impact certain key financial ratios.

Exhibit 2: Cminus Ltd. Selected Financial Data at 31 December 2018
Balance Sheet (AUD thousands)
Cash	980
Accounts receivable	900
Inventory	1,200
Property, plant, and equipment (PPE)	3,000
Accumulated depreciation	(300)
Total assets	5,780
Accounts payable	450
Long-term debt	3,000
Capital stock	1,500
Retained earnings	830
Total liabilities and equity	5,780
Income Statement (AUD thousands)
Sales	12,000
Cost of goods sold (COGS)	9,000
Net income	1,180
Dividends	(350)
Retained earnings	830

Exhibit 3: Exchange Rates Applicable to Cminus Ltd.
Date	SGD/AUD
1 January 2018	0.968
Average, 2018	0.906
Weighted-average rate when inventory was acquired	0.954
1 December 2018 when dividends were declared	0.962
31 December 2018	0.971

(3A) If Cminus Ltd. uses the Singapore dollar (SGD) as its functional currency, what would be the leverage ratio (total debt/total assets)? [10 marks]

(3B) Compare the inventory turnover ratio (COGS/Inventory) under the current rate method and the temporal method. [10 marks]

(3C) Compare the fixed asset turnover ratio (Sales/PPE) under the current rate method and the temporal method. [10 marks]

(3D) Based on your answers to parts (3B) and (3C), explain which translation method Cminus should use, assuming it has a choice in method, if the company would like to show higher efficiency. [2 marks]