Homework Help is Here – Start Your Trial Now!
Business
Accounting
Given the ratios  for 2020 as follows  debtor's collection period=46days stock days on hand=60days creditors payment period =46.34 days  Total debt ratio=35%

Given the ratios  for 2020 as follows  debtor's collection period=46days stock days on hand=60days creditors payment period =46.34 days  Total debt ratio=35%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

a. Given the ratios  for 2020 as follows

 debtor's collection period=46days

stock days on hand=60days

creditors payment period =46.34 days 

Total debt ratio=35%

Show how the above were calculated

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.
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS