QUESTION $5(20$ Marks$)5\mathrm{.}1$ REQUIRED Study the information provided below and answer the following questions: $5\mathrm{.}1\mathrm{.}1$ Explain to the board of directors of Badger Limited why it is necessary to draw up a statement of cash flows in addition to the other financial statements. $5\mathrm{.}1\mathrm{.}25\mathrm{.}1\mathrm{.}3$ Calculate the effective interest rate on the additional loan from Med Bank. What would have been the effective interest rate on the additional loan from Med Bank if there was a $10\%$ compensating balance requirement and the interest rate was $18\%?$ INFORMATION $(4$ marks$)(3$ marks$)(3$ marks$)$ The statement of cash flows of Badger Limited for the year ended $31$ December $2024$ reflected an increase in the long$-$term loan from Med Bank of R$1728000.$ The additional loan was obtained on $01$ January $2024.$ The interest on this loan for the year ended $31$ December $2024$ was R$276480.$ No repayments were made during the financial year. Interest is not capitalised. $5\mathrm{.}2$ REQUIRED Calculate the rate of inventory turnover $($expressed to two decimal places$)$ from the information provided below. INFORMATION The following figures were supplied by Spark Stores for the year ended $31$ December $2024$: $(5$ marks$)$ Opening inventory R Sales $120000$ Gross profit $2500000700000$ Closing inventory $2000005\mathrm{.}3$ REQUIRED Study the information given below and calculate the after$-$tax profit on the new sales. INFORMATION $(5$ marks$)$ The owner of Flamingo Limited is considering selling on credit to customers in another city. Sales from these customers are expected to amount to R$560000.$ However, $16\%$ of the sales is expected to be uncollectible. Additional collection costs are estimated to be $12\%$ of sales. The goods will be priced at cost plus $40\%.$ The tax rate of the company is $27\%.$ FORMULA SHEET Operating profit X $100$ Net assets $1$ Inventory X $365$ Cost of sales $1$ Accounts receivable X $365$ Credit sales $1$ Cost price of inventory sold Average inventory on hand Interest X $100$ Face value of the loan $$ Interest $1$ Interest X $100$ Face value of the loan $$ Compensating balance $1$ E$$H$$ EH $22$ O$($D$)$ O$($D$)$ E E$$ Incremental profit after tax X $100$ Additional sales $1$ Accounts payable X $365$ Credit purchases $1$ Bad debts X $100$ Credit sales $1$ Sales in units Average units of inventory on hand Interest X $100$ Face value of the loan $1$ Current assets: Current liabilities $2$OC $$ AS CC S $$ N $2$

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