a. Given the debtor's collection period, stock days on hand and creditors payment period for 2020 are 46,60 and 46.34 respectively, calculate the  debtor's collection period, stock days on hand and creditors payment period for 2021 also. Analyse why the ratios changed for the two years. b. Suggest way

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Chapter1: Financial Statements And Business Decisions
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a. Given the debtor's collection period, stock days on hand and creditors payment period for 2020 are 46,60 and 46.34 respectively, calculate the  debtor's collection period, stock days on hand and creditors payment period for 2021 also. Analyse why the ratios changed for the two years.

b. Suggest ways to improve the financial ratios.

Read the scenario below and answer the questions that follow:
Sail Along (Pty) Ltd is a small sailing boat and equipment manufacturer. It also
has its own retail outlet and supplies to other shops. It is based in the Easten
Cape and, due to the extent of open water lakes in the area, has always run a
successful business.
Over the past few years, the community has become more health conscious and
interest in outdoor sporting activities has increased. Many foreigners spend their
summers here and partake in water sports.
The company is funded by debt and equity. Two years ago, it had a R150 000
cash injection from shareholders to reduce its debt levels. This was to help the
company through the pandemic.
At around the same time, the company launched an online purchase option,
which has been very successful.
Sail Along developed a unique kite surfer that is able to lift a surfer out of the
water at least 10 metres. Manufacturing commenced in mid-2020 and the
company is experiencing good demand through online sales.
Transcribed Image Text:Read the scenario below and answer the questions that follow: Sail Along (Pty) Ltd is a small sailing boat and equipment manufacturer. It also has its own retail outlet and supplies to other shops. It is based in the Easten Cape and, due to the extent of open water lakes in the area, has always run a successful business. Over the past few years, the community has become more health conscious and interest in outdoor sporting activities has increased. Many foreigners spend their summers here and partake in water sports. The company is funded by debt and equity. Two years ago, it had a R150 000 cash injection from shareholders to reduce its debt levels. This was to help the company through the pandemic. At around the same time, the company launched an online purchase option, which has been very successful. Sail Along developed a unique kite surfer that is able to lift a surfer out of the water at least 10 metres. Manufacturing commenced in mid-2020 and the company is experiencing good demand through online sales.
Below are the financial statements for the year ended 31 December 2021 and
2020.
Sail Along (Pty) Limited
Statement of profit or loss and comprehensive for the year ended
31 December 2021
2021
2020
Revenue
3 250 000
2 660 000
(1 570 000)
1 680 000
Cost of sales
(1 325 000)
Gross profit
1 335 000
Other costs
(1 190 000)
(1 010 000)
Earnings before interest and tax
490 000
325 000
Interest expense
(26 500)
(24 900)
Profit before taxation
463 500
300 100
Taxation
(129 780)
(84 028)
Profit for the year
333 720
216 072
Sail Along (Pty) Limited
Statement of financial position as at 31 December 2021
2021
2020
2019
ASSETS
Non-current assets
802 000
720 000
600 000
Property, plant, equipment
802 000
720 000
600 000
Current assets
614 000
498 000
444 000
Inventory
270 000
223 000
209 000
Accounts receivable
340 000
255 000
210 000
Cash & cash equivalents
4 000
20 000
25 000
TOTAL ASSETS
1 416 000
1 218 000
1 044 000
EQUITY AND LIABILITIES
Equity and reserves
866 000
789 000
544 000
Share capital
400 000
400 000
250 000
Retained income
466 000
389 000
294 000
Non-current liabilities
265 000
249 000
340 000
Long-term loan
265 000
249 000
340 000
Current liabilities
285 000
180 000
160 000
Accounts payable
285 000
180 000
160 000
TOTAL EQUITY AND LIABILITIES
1 416 000
1 218 000
1 044 000
Additional information:
1.
70% of sales are on credit.
2.
All purchases are on credit.
3.
There are 365 days in a year.
Transcribed Image Text:Below are the financial statements for the year ended 31 December 2021 and 2020. Sail Along (Pty) Limited Statement of profit or loss and comprehensive for the year ended 31 December 2021 2021 2020 Revenue 3 250 000 2 660 000 (1 570 000) 1 680 000 Cost of sales (1 325 000) Gross profit 1 335 000 Other costs (1 190 000) (1 010 000) Earnings before interest and tax 490 000 325 000 Interest expense (26 500) (24 900) Profit before taxation 463 500 300 100 Taxation (129 780) (84 028) Profit for the year 333 720 216 072 Sail Along (Pty) Limited Statement of financial position as at 31 December 2021 2021 2020 2019 ASSETS Non-current assets 802 000 720 000 600 000 Property, plant, equipment 802 000 720 000 600 000 Current assets 614 000 498 000 444 000 Inventory 270 000 223 000 209 000 Accounts receivable 340 000 255 000 210 000 Cash & cash equivalents 4 000 20 000 25 000 TOTAL ASSETS 1 416 000 1 218 000 1 044 000 EQUITY AND LIABILITIES Equity and reserves 866 000 789 000 544 000 Share capital 400 000 400 000 250 000 Retained income 466 000 389 000 294 000 Non-current liabilities 265 000 249 000 340 000 Long-term loan 265 000 249 000 340 000 Current liabilities 285 000 180 000 160 000 Accounts payable 285 000 180 000 160 000 TOTAL EQUITY AND LIABILITIES 1 416 000 1 218 000 1 044 000 Additional information: 1. 70% of sales are on credit. 2. All purchases are on credit. 3. There are 365 days in a year.
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