Question

QUESTION 4 (20 Marks) REQUIRED Use the information provided below to answer the following questions. Note: Use the formulas provided in the formula sheet only (that appear after QUESTION 5). The answers to the ratios must be expressed to two decimal places. 4.1 Calculate the ratio that determines the company's profitability after the cost of sales have been deducted from the sales. (2 marks) 4.2 Compare the earnings per share with the dividend per share for 2023. What conclusions can you draw from this comparison? (4 marks) 4.3 Will the shareholders be satisfied with the return earned by the company on the own capital? Motivate your answer by using an appropriate ratio. (3 marks) 4.4 Comment on the ability of the company to settle its short-term obligations with just its most liquid current assets. Use a ratio to support your answer. (3 marks) 4.5 Comment on the effectiveness with which the company has managed the inventory, debtors and creditors. Support your answer by calculating the relevant ratios. (8 marks) INFORMATION Excerpts of the financial data of Daken Limited for 2023 are as follows: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023 | | R | | :--- | :--- | | Sales | 2 200 000 | | Cost of sales | (1 538 000) | | Opening inventory | 92 000 | | Purchases | ? | | Closing inventory | (114 000) | | Gross profit | 662 000 | | Operating profit | 282 000 | | Interest expense | (80 000) | | Profit before tax | 202 000 | | Company tax | (108 540) | STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023 | | R | | :--- | :--- | | Non-current assets | 1 280 000 | | Inventories | ? | | Accounts receivable | 680 000 | | Cash | 8 000 | | Ordinary share capital | 900 000 | | Retained earnings | 172 000 | | Long-term loan | 658 000 | | Accounts payable | 220 000 | | Company tax payable | 72 000 | | Dividends payable | 60 000 | Additional information - All purchases and sales of inventories are on credit. - There were 450 000 ordinary shares in issue during 2023. - An interim dividend of R50 000 was paid on 30 June 2023. - Credit terms to debtors were 30 days whilst creditors have granted credit terms of 60 days. - Inventories were replaced after approximately 30 days during 2022.

          QUESTION 4
(20 Marks)
REQUIRED
Use the information provided below to answer the following questions. Note: Use the formulas provided in the formula sheet only (that appear after QUESTION 5). The answers to the ratios must be expressed to two decimal places.
4.1 Calculate the ratio that determines the company's profitability after the cost of sales have been deducted from the sales.
(2 marks)
4.2 Compare the earnings per share with the dividend per share for 2023. What conclusions can you draw from this comparison?
(4 marks)
4.3 Will the shareholders be satisfied with the return earned by the company on the own capital? Motivate your answer by using an appropriate ratio.
(3 marks)
4.4 Comment on the ability of the company to settle its short-term obligations with just its most liquid current assets. Use a ratio to support your answer.
(3 marks)
4.5 Comment on the effectiveness with which the company has managed the inventory, debtors and creditors. Support your answer by calculating the relevant ratios.
(8 marks)
INFORMATION
Excerpts of the financial data of Daken Limited for 2023 are as follows:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
| | R |
| :--- | :--- |
| Sales | 2 200 000 |
| Cost of sales | (1 538 000) |
| Opening inventory | 92 000 |
| Purchases | ? |
| Closing inventory | (114 000) |
| Gross profit | 662 000 |
| Operating profit | 282 000 |
| Interest expense | (80 000) |
| Profit before tax | 202 000 |
| Company tax | (108 540) |

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
| | R |
| :--- | :--- |
| Non-current assets | 1 280 000 |
| Inventories | ? |
| Accounts receivable | 680 000 |
| Cash | 8 000 |
| Ordinary share capital | 900 000 |
| Retained earnings | 172 000 |
| Long-term loan | 658 000 |
| Accounts payable | 220 000 |
| Company tax payable | 72 000 |
| Dividends payable | 60 000 |

Additional information
- All purchases and sales of inventories are on credit.
- There were 450 000 ordinary shares in issue during 2023.
- An interim dividend of R50 000 was paid on 30 June 2023.
- Credit terms to debtors were 30 days whilst creditors have granted credit terms of 60 days.
- Inventories were replaced after approximately 30 days during 2022.

QUESTION 4
(20 Marks)
REQUIRED
Use the information provided below to answer the following questions. Note: Use the formulas provided in the formula sheet only (that appear after QUESTION 5). The answers to the ratios must be expressed to two decimal places.
4.1 Calculate the ratio that determines the company's profitability after the cost of sales have been deducted from the sales.
(2 marks)
4.2 Compare the earnings per share with the dividend per share for 2023. What conclusions can you draw from this comparison?
(4 marks)
4.3 Will the shareholders be satisfied with the return earned by the company on the own capital? Motivate your answer by using an appropriate ratio.
(3 marks)
4.4 Comment on the ability of the company to settle its short-term obligations with just its most liquid current assets. Use a ratio to support your answer.
(3 marks)
4.5 Comment on the effectiveness with which the company has managed the inventory, debtors and creditors. Support your answer by calculating the relevant ratios.
(8 marks)
INFORMATION
Excerpts of the financial data of Daken Limited for 2023 are as follows:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
| | R |
| :— | :— |
| Sales | 2 200 000 |
| Cost of sales | (1 538 000) |
| Opening inventory | 92 000 |
| Purchases | ? |
| Closing inventory | (114 000) |
| Gross profit | 662 000 |
| Operating profit | 282 000 |
| Interest expense | (80 000) |
| Profit before tax | 202 000 |
| Company tax | (108 540) |

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
| | R |
| :— | :— |
| Non-current assets | 1 280 000 |
| Inventories | ? |
| Accounts receivable | 680 000 |
| Cash | 8 000 |
| Ordinary share capital | 900 000 |
| Retained earnings | 172 000 |
| Long-term loan | 658 000 |
| Accounts payable | 220 000 |
| Company tax payable | 72 000 |
| Dividends payable | 60 000 |

Additional information
- All purchases and sales of inventories are on credit.
- There were 450 000 ordinary shares in issue during 2023.
- An interim dividend of R50 000 was paid on 30 June 2023.
- Credit terms to debtors were 30 days whilst creditors have granted credit terms of 60 days.
- Inventories were replaced after approximately 30 days during 2022.

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