QUESTION 4 (20 MARKS)

REQUIRED Use the information provided below to prepare the Cash Flow Statement of Alto Limited for the year ended 31 December 2022.

INFORMATION The following amounts were obtained from the Statement of Comprehensive Income for the year ended 31 December 2022 and Statement of Financial Position of Alto Limited as at 31 December 2022 and 31 December 2021:

31 Dec 2022 31 Dec 2021 R

Sales 11 000 000

Cost of sales 6 500 000

Depreciation 750 000

perating profit 1 650 000

Interest expense 450 000

Company tax for the year 400 000

Property, plant and equipment (carrying value) DR 6 250 000 CR5 000 000

Long-term investments DR 350 000 CR 400 000

Inventories DR 2 150 000 CR 2 050 000

Accounts receivable 1 700 000 1 700 000

Prepaid expenses 200 000 50 000

Cash and cash equivalents 500 000 350 000

Ordinary share capital (All shares issued at R10 each) 3 100 000 3 100 000

Retained earnings 3 000 000 2 500 000

Non-current liabilities 3 600 000 3 350 000

Accounts payable 1 100 000 200 000

Accrued expenses 100 000 70 000

Dividends payable 200 000 250 000

Company tax payable 50 000 80 000

Note: Dividends paid and recommended during 2022 amounted to R300 000.

All purchases and sales of inventories are on credit.

Some of the investments were redeemed during the financial year ended 31 December 2022.

Debtors are granted credit terms of 30 days.

QUESTION 5 (20 MARKS)

REQUIRED Use the information provided in QUESTION 4 to answer the following questions:

5.1 Calculate the following ratios (expressed to two decimal places) for 2022 only.

5.1.1 Gross margin (2 marks)

5.1.2 Dividend per share (2 marks)

5.1.3 Return on assets (2 marks)

5.1.4 Current ratio (2 marks)

5.1.5 Acid test ratio (2 marks)

5.1.6 Debt to equity (2 marks)

5.1.7 Creditor payment period (2 marks)

5.2 Comment on the following ratios: 2022 2021

5.2.1 Inventory turnover 3.10 times 6.35 times (2 marks)

5.2.2 Debtors collection period 56.41 days 29.45 days (2 marks)

5.2.3 Return on equity 13.11% 18.80% (2 marks)