KIARA LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS Property, plant and equipment (cost) Accumulated depreciation Long-term investments Inventory Accounts receivable Company tax paid in advance Bank EQUITY AND LIABILITIES 2024 2023 R R 2 490 000 1 620 000 (630 000) 660 000 1 050 000 1 230 000 30 000 (480 000) 450 000 1 290 000 900 000 0 750 000 660 000 5 580 000 4 440 000 Ordinary share capital 2 700 000 2 000 000 Retained income 1 500 000 1 158 000 Long-term loan from Kip Bank (15%) 900 000 1 000 000 Accounts payable 480 000 228 000 Company tax payable 0 54 000 5 580 000 4 440 000 ADDITIONAL INFORMATION All purchases and sales are on credit. Interim dividends paid during the year amounted to R150 750. Credit terms of 3/10 net 60 days are granted by creditors. REQUIRED Use the information provided below to answer the following questions (with ratios expressed to two decimal places). Use only the formulas provided in the formula sheet that appear after Question 5. 2.1 Will the company be able to settle its short-term obligations with its short-term assets? Motivate your answer with the use of a ratio. 2.2 The directors are considering financing the expansion of the company by taking out a long-term loan. With the use of TWO (2) relevant ratios advise whether this would be appropriate for the company. (3 marks) (6 marks) 2.3 Comment on the dividend payout rate of the company. (2 marks) 2.4 Calculate the cost (as a percentage) to Kiara Limited of not accepting discounts from creditors in settlement of accounts. (3 marks) 2.5 As a shareholder would you be satisfied with the profitability of the company? Motivate your answer with the relevant ratio. (3 marks) 2.6 Is the company's debt payment period appropriate? Justify your answer by using an appropriate ratio. (3 marks) INFORMATION The condensed information given below was obtained from the books of Kiara Limited: KIARA LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024 R Sales Cost of sales Gross profit Operating expenses Operating profit Interest income Interest expense Profit before tax Company tax Profit after tax 4 200 000 (2 652 000) 1 548 000 (798 000) 750 000 60 000 (135 000) 675 000 (182 250) 492 750
KIARA LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS Property, plant and equipment (cost) Accumulated depreciation Long-term investments Inventory Accounts receivable Company tax paid in advance Bank EQUITY AND LIABILITIES 2024 2023 R R 2 490 000 1 620 000 (630 000) 660 000 1 050 000 1 230 000 30 000 (480 000) 450 000 1 290 000 900 000 0 750 000 660 000 5 580 000 4 440 000 Ordinary share capital 2 700 000 2 000 000 Retained income 1 500 000 1 158 000 Long-term loan from Kip Bank (15%) 900 000 1 000 000 Accounts payable 480 000 228 000 Company tax payable 0 54 000 5 580 000 4 440 000 ADDITIONAL INFORMATION All purchases and sales are on credit. Interim dividends paid during the year amounted to R150 750. Credit terms of 3/10 net 60 days are granted by creditors. REQUIRED Use the information provided below to answer the following questions (with ratios expressed to two decimal places). Use only the formulas provided in the formula sheet that appear after Question 5. 2.1 Will the company be able to settle its short-term obligations with its short-term assets? Motivate your answer with the use of a ratio. 2.2 The directors are considering financing the expansion of the company by taking out a long-term loan. With the use of TWO (2) relevant ratios advise whether this would be appropriate for the company. (3 marks) (6 marks) 2.3 Comment on the dividend payout rate of the company. (2 marks) 2.4 Calculate the cost (as a percentage) to Kiara Limited of not accepting discounts from creditors in settlement of accounts. (3 marks) 2.5 As a shareholder would you be satisfied with the profitability of the company? Motivate your answer with the relevant ratio. (3 marks) 2.6 Is the company's debt payment period appropriate? Justify your answer by using an appropriate ratio. (3 marks) INFORMATION The condensed information given below was obtained from the books of Kiara Limited: KIARA LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024 R Sales Cost of sales Gross profit Operating expenses Operating profit Interest income Interest expense Profit before tax Company tax Profit after tax 4 200 000 (2 652 000) 1 548 000 (798 000) 750 000 60 000 (135 000) 675 000 (182 250) 492 750
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question

Transcribed Image Text:KIARA LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:
ASSETS
Property, plant and equipment (cost)
Accumulated depreciation
Long-term investments
Inventory
Accounts receivable
Company tax paid in advance
Bank
EQUITY AND LIABILITIES
2024
2023
R
R
2 490 000
1 620 000
(630 000)
660 000
1 050 000
1 230 000
30 000
(480 000)
450 000
1 290 000
900 000
0
750 000
660 000
5 580 000
4 440 000
Ordinary share capital
2 700 000
2 000 000
Retained income
1 500 000
1 158 000
Long-term loan from Kip Bank (15%)
900 000
1 000 000
Accounts payable
480 000
228 000
Company tax payable
0
54 000
5 580 000
4 440 000
ADDITIONAL INFORMATION
All purchases and sales are on credit.
Interim dividends paid during the year amounted to R150 750.
Credit terms of 3/10 net 60 days are granted by creditors.

Transcribed Image Text:REQUIRED
Use the information provided below to answer the following questions (with ratios expressed to two decimal
places). Use only the formulas provided in the formula sheet that appear after Question 5.
2.1 Will the company be able to settle its short-term obligations with its short-term assets?
Motivate your answer with the use of a ratio.
2.2 The directors are considering financing the expansion of the company by taking out a
long-term loan. With the use of TWO (2) relevant ratios advise whether this would be
appropriate for the company.
(3 marks)
(6 marks)
2.3 Comment on the dividend payout rate of the company.
(2 marks)
2.4 Calculate the cost (as a percentage) to Kiara Limited of not accepting discounts from
creditors in settlement of accounts.
(3 marks)
2.5 As a shareholder would you be satisfied with the profitability of the company? Motivate
your answer with the relevant ratio.
(3 marks)
2.6 Is the company's debt payment period appropriate? Justify your answer by using an
appropriate ratio.
(3 marks)
INFORMATION
The condensed information given below was obtained from the books of Kiara Limited:
KIARA LIMITED
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024
R
Sales
Cost of sales
Gross profit
Operating expenses
Operating profit
Interest income
Interest expense
Profit before tax
Company tax
Profit after tax
4 200 000
(2 652 000)
1 548 000
(798 000)
750 000
60 000
(135 000)
675 000
(182 250)
492 750
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