STUDY UNITS COVERED : CHAPTERS 3-7. DUE DATE : 3pm Tuesday 16 March 2010

Transcription

1 Page 1 of 5 ASSIGNMENT 1 st SEMESTER : FINANCIAL ACCOUNTING (FA) STUDY UNITS COVERED : CHAPTERS 3-7 DUE DATE : 3pm Tuesday 16 March 2010 TOTAL MARKS : 100 INSTRUCTIONS TO CANDIDATES FOR COMPLETING AND SUBMITTING ASSIGNMENTS The complete Instructions to Students for Completing and Submitting Assignments must be collected from any IMM GSM office, the relevant Student Support Centre or can be downloaded from the IMM GSM website. It is essential that the complete instructions be studied prior to commencing your assignment. The following points highlight only a few important notes. 1) You are required to submit ONE assignment per subject. 2) The assignment will contribute 20% towards the final examination mark, and the other 80% will be made up from the examination, however the examination papers will count out of 100%. 3) Although your assignment will contribute towards your final examination mark, you do not have to earn credits for admission to the examinations; you are automatically accepted on registering for the exam. 4) Number all the pages of your assignment (page 1 of 4) and write your name and surname, student number and subject at the top of each page. 5) The IMM GSM requires assignments to be presented on plain A4 paper. You must show all working calculations, including and where appropriate multiple choice working calculations. 6) A separate assignment cover, which is provided by the IMM GSM, must be attached to the front cover of each assignment. 7) Retain a copy of each assignment before submitting, in case the original does not reach the IMM GSM. 8) The assignment due date refers to the day up to which assignments will be accepted for marking purposes. The deadline is 3:00pm on the 16 March Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00pm on the 16 March 2010 and up to 5:00pm the following day after which no assignments will be accepted. 9) If you fail to follow these instructions carefully, the IMM Graduate School of Marketing cannot accept responsibility for the return of the assignment. It may even result in your assignment not being marked. Results will be available on the IMM GSM website: on Friday, 7 May 2010.

2 Page 2 of 5 QUESTION 1 [20] MP Ltd imports and distributes multi-purpose tools to stores throughout South Africa. The company has the distribution rights for Southern Africa, but distribution outside South Africa is handled by an associated company, who pays a royalty to MP Ltd. You have been asked to assist the company in managing their cash balances over the next six months from April to September. You have been provided with the following information: The bank balance on 1 April 2010 is forecast at R Sales for February to May will be R1,4 million per month, but will double for the next three months. This is due to the Soccer World Cup and the traditional winter holiday and hunting season. In September 2010 sales are expected to amount to R1,2 million. All sales are made on credit. 10% of customers (total debtors) pay within 10 days of purchase and take a 5% discount for doing so. 1% of total debtors (total sales) do not pay at all. Of the remaining debtors 60% pay one month after sale and the rest (balance) two month after sale. MP Ltd receives a fixed quarterly royalty of R per calendar quarter from their associated company until January each year, when the final settlement is made based on the previous year s sales and payments. Purchases are made one month prior to sales and two months credit is taken from suppliers. The company s gross margin is 40%. The cost of employing MP Ltd s permanent staff is R per month. For the three high sales months, temporary staff will be employed at a cost of R per month. The permanent staff will receive a double cheque in September. Administrative and logistical costs amount to R per month, including depreciation of R per month. These costs are expected to escalate by 30% for the three high volume months. Administrative and logistical costs are paid one month after being incurred. MP Ltd will pay an interim dividend of R in July 2010 and provisional taxation of R in August. 1.1 Prepare a monthly cash budget for EACH of the six months from April 2010 to 30 September 2010, showing clearly any necessary workings. (18)

3 Page 3 of 5 All workings should be in. Opening and closing bank balances are not required, only the monthly net cash flow. 1.2 The purchases are paid in US$. When will this have no impact on the cash flows as calculated? (2) QUESTION 2 [40] Marble Ltd presents the following financial information for the years ended 31 December: Turnover Cost of sales Gross profit Operational costs Operating profit Interest paid Net profit before tax Taxation Net profit after tax , , , , ,8 895, ,6 292,5 752, , , , , ,9 967, ,6 482, , , , , , ,5 87, ,1 607, , , , , , ,8 101, ,6 430, ,4 Additional information: 1. Operating costs consist of: 7 219, , , ,4 Administrative salaries Logistical expenses Bad debt & other write-offs 3 955, ,9 542, , ,7 247, , ,2 119, , ,4 101,0 2. Inflation rates: The inflation rate is the rate applicable for the calendar year 9% 11% 8% 10% 3. Long-term loan: A long-term loan of R7,5 million was obtained on 2 January with a variable interest rate of: 11% 12% 2.1 Calculate the following ratios for and : Gross profit percentage (GP %) Operating profit percentage (OP %) Net profit after tax (NPAT %) Interest cover (TIE) (8)

4 Page 4 of Briefly discuss Marble Ltd s performance from 2006 to by focussing on: Turnover Operating costs Interest paid Comments should be substantiated by applicable calculations. (14) 2.3 Briefly list and comment on the issues that may have influenced the gross profit margin. (10) 2.4 What may have caused interest paid, other than that on the long-term loan? (2) 2.5 What will the impact of the long-term loan of R7,5 million obtained in be on Marble Ltd. (6) QUESTION 3 [40] Metal Ltd is a manufacturing company on the East Rand. The following information relates to the financial years ended on 31 December: Assets Non-current assets Current assets Inventory Accounts receivable Bank and cash on hand Total assets Equity and liabilities Equity Share capital and reserves Long-term liability Long-term loan Current liabilities Trade payables Taxation Total equity and liabilities Other information: 1. Shares in issue (R1 each)

5 Page 5 of 5 2. Income statement: Turnover all on credit Purchases of raw materials all on credit Non-current assets: Book value Accumulated depreciation 31/12/09 Proposed purchase 2010 Depreciation rate p.a. Depreciation method* Factory equipment % SL Furniture % RB Vehicles % SL * Method: S/L = Straight-line R/B = Reducing balance Purchase of non-current assets will take place on 1 July Inventory on hand on 31 December 2007 amounted to R3 million. 5. The return on equity is 18% and the cost of long-term debt is 12%. 6. Metal Ltd has a tax rate of 28%. 3.1 Calculate the following for and : Total asset turnover Inventory turn Debtors days outstanding Creditors payment period Current ratio Acid test Gearing ratio Net asset value per share (18) 3.2 Calculate the forecast depreciation charge and net book value of non-current assets for (10) 3.3 Calculate Metal Ltd s weighted average cost of capital for. (4) 3.4 How should the proposed acquisition of non-current assets in 2010 be financed. (4) 3.5 Briefly discuss working capital trade-off strategies. (4) ASSIGNMENT TOTAL: 100