As the Financial Manager of TopClass Stores, you are busy preparing for a management meeting to discuss the results

INSTRUCTIONS TO CANDIDATES

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As the Financial Manager of TopClass Stores, you are busy preparing for a management meeting to discuss the results of TopClass Stores for the year ended 31 August 2021.  The following is an extract from the Statement of Comprehensive Income for the year ended 31 August 2021.

 

EXTRACT:  STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 AUGUST 2021

Sales 900 000

Gross Profit 175 000

  

STATEMENT OF FINANCIAL POSITION OF TOPCLASS STORES AS AT 31 AUGUST 2021

31 AUGUST 2021

ASSETS

NON-CURRENT ASSETS

Land and buildings

Plant and machinery 3 750 000

450 000

CURRENT ASSETS

Inventory

Trade Receivables

Cash and cash equivalents 120 000

75 000

0

TOTAL ASSETS 4 395 000

OWNERS EQUITY AND LIABILITIES

OWNERS EQUITY 1 500 000

NON-CURRENT LIABILITIES

Mortgage Loan:  Fourth National Bank 2 750 000

CURRENT LIABILITIES

Trade Creditors

Bank Overdraft 105 000

40 000

TOTAL EQUITY AND LIABILITIES 4 395 000

 

Additional Information :

1. The Net Profit Percentage (%) has been calculated correctly as 20% for the year ended 31 August 2021.

2. 25% of all sales are for cash.

3. There are 365 days in a year.

4. The following balances appeared in the Statement of Financial Position as at 31 August 2020.

• Trade Receivables R150 000

• Trading Inventory R135 000

• Owners’ Equity R1 000 000

• Trade Creditors R80 000

 

REQUIRED:

 

Calculate the following ratios for the year ended 31 August 2021.

Show all workings.

 

1. Solvency ratio             (5)

    

2. Current ratio                            (3)     

 

3. Average debtors collection period             (6)           

4. Inventory turnover rate             (5)

 

5. Return on average owner’s equity             (6)

 

 

 

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