a) L Deacon sets up a new business. Before he actually sells anything he has bought Motor Vehicles of Ksh 3,000,000, Premises of Ksh 7,000,000, Stock of goods Ksh 2,000.000 He still owes Ksh 800,000 in respect of them. He had borrowed Ksh 4,000,000 from D Evans. After the events just described and before trading starts, he had Ksh 300,000 Cash in hand and Ksh 600,000 Cash at bank. Required: Calculate the amount of his capital
a) L Deacon sets up a new business. Before he actually sells anything he has bought Motor Vehicles of Ksh 3,000,000, Premises of Ksh 7,000,000, Stock of goods Ksh 2,000.000 He still owes Ksh 800,000 in respect of them. He had borrowed Ksh 4,000,000 from D Evans. After the events just described and before trading starts, he had Ksh 300,000 Cash in hand and Ksh 600,000 Cash at bank.
Required:
Calculate the amount of his capital
b) The role of financial statements analysis is to use financial reports prepared by companies combined with other information, to evaluate the past, current and potential performance and financial position of a company for the purpose of making investment, credit and other economic decisions.
In relation to the above statements, analyze two types of economic decisions that a financial analyst could make from the financial statement s of a company
c) The company’s earnings for the past three years indicated the following pattern \
Year Amount ( Shs)
2018 20 Million
2019 60 million
2020 140 Million
2021 ?
Other things remaining the same, compute possible earnings for year 2021
d) Explain two possible risks to a company that makes losses regularly?
e)You have given the following extracts of accounts of company ABC ltd
2020 (SHS) 2019 (SHS)
Sales 10,000,000 6,000,000
Purchases 4,000,000 2,000,000
Stock 2,500,000 1,000,000
Debtors 4,000,000 1,000,000
Creditors 1,500,000 2,000,000
Accruals 1,000,000 800,000
Bank overdraft - 500,000
Cash 2,500,000 1,500,000
Noncurrent asset 8,000,000 5,000,000
Required: compute for each year:
i)
ii) Debtors holding period
iii) Non - Asset Turnover
e) i) Comment on implication of having very high cost of sales to the profits of a company
ii) Explain one strategy that a company can put in place to manage high cost of sales
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