Mr A. Makebe owns a sugarcane farm in the Mpumalanga sugar belt. As his financialadvisor, it is your job to monitor changes in the financial structure of his operations overtime.He presents you with his Balance Sheets for the 201X and 201Y seasons. In addition, heinforms you that Net Farm Income for 201X was R256 000 while interest charges onloans totaled R150 000. Corresponding figures for 201Y were R1 060 000 and R238 000,respectively.Use ratio analysis to compute the following financial ratios from the data that he hasprovided:A. Solvency measures:i. Net capital ratioii. Leverage ('gearing") ratio.iii. Own capital ratioB. Liquidity measures:i. Current ratioii. Acid test ratio (assume livestock and supplies cannot be converted to cashimmediately)iii. Intermediate (medium-term) ratio

Solvency Measures:Net Capital Ratio (Equity Ratio): This ratio indicates the proportion of a…

Answered: Mr A. Makebe owns a sugarcane farm in…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Q12)A companys capital structure consists of the following. Amount in () Eauity share of ₹100 Each Retained Earnings 9% Preference shares 10% Debentures 15,00,000 Total The company earns 10% on its capital. The Income tax Rate is 50%. The company requires a sum of ₹25,00,000 to finance its Expansion programme for which the following alternatives are Available to it:- 1) Issue of 20,000 equity shares at a premium of 25 per share. 2) Issue of 10% preference shares. 3) Issue of 8% debentures. Which of the three financing alternatives would you recommend and why?
CB Winter Sports specializes in providing ski lessons to beginners. The company uses the allowance method to account for uncollectible accounts expense CB Winter Sports experienced the following four accounting events in Year 1: 1. Recognized $266,000 of revenue on account. 2. Collected $126,000 cash from accounts receivable. 3. Wrote off uncollectible accounts of $2,300, 4. Recognized uncollectible accounts expense, CB Winter Sports estimated that uncollectible accounts expense will be 3 percent of sales on account Required: Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA) The first transaction is shown as an example. Note: Enter any decreases to account balances and cash…
John is a finance director of Nadim Product PLC, a company which manufactures and sells bathroom product such as baths, sinks and toilet. These product are sold through a selection of specialist shops and through larger store, customers include professional plumbers and also ordinary householder who are renovating their houses themselves. The company operates at the lower end of the market and does not have a strong reputation for service. Sales have been slowly declining whereas those of competitors have been improving. In order to encourage increased sales the board of directors has decided to pay senior staff a bonus if certain target is achieved. The two main targets are based on profit levels and annual sales. Two months before the end of the financial year the finance director asks one of his staff to check through the order and account to assess the current situation. He informed that without a sudden improvement in sales before the year end the important sales target will not…
Budgeting for a Merchandising Firm Goldberg Company is a retail sporting goods store thatuses an accrual accounting system. Facts regarding its operations follow:∙ Sales are budgeted at $250,000 for December and $225,000 for January, terms 1/eom, n/60.∙ Collections are expected to be 50% in the month of sale and 48% in the month following the sale.Two percent of sales are expected to be uncollectible and recorded in an allowance account at theend of the month of sale. Bad debts expense is included as part of operating expenses.∙ Gross margin is 30% of gross sales.∙ All accounts receivable are from credit sales. Bad debts are written off against the allowanceaccount at the end of the month following the month of sale.∙ Goldberg desires to have 80% of the merchandise for the following month’s sales on hand at the endof each month. Payment for merchandise is made in the month following the month of purchase.∙ Other monthly operating expenses to be paid in cash total $25,000.∙ Annual…
Kamal Fatehl production manager of Kennesaw Manufacturing, finds his profit at $22,400 (as shown in the statement below) inadequate for expanding his business. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Kamal would like to improve profit line to $32,400 so he can obtain the bank's approval for the loan. % of sales Sales 280,000 100% Cost of supply chain purchases 201,600 72% Other production costs 28,000 10% Fixed costs 28,000 10% Profit 22,400 8% Part 2 a) What percentage…
Retailer Budget D. Tomlinson Retail seeks your assistance in developing cash and other budgetinformation for May, June, and July. The store expects to have the following balances at the end ofApril:Cash $ 5,500Accounts receivable 437,000Inventories 309,400Accounts payable 133,055The firm follows these guidelines in preparing its budgets:∙ Sales. All sales are on credit with terms of 3/10, n/30. Tomlinson bills customers on the last day ofeach month. The firm books receivables at gross amounts and collects 60% of the billings withinthe discount period, 25% by the end of the month, and 9% by the end of the second month. Thefirm’s experience suggests that 6% is likely to be uncollectible and is written off at the end of thethird month.∙ Purchases and expenses. All purchases and expenses are on open account. The firm pays its payables over a 2-month period with 54% paid in the month of purchase. Each month’s units of endinginventory should equal 130% of the next month’s cost of sales. The…
Pls help ASAP for both
Subject: accounting
Assume that a company provided the following information and assumptions from its master budget: Sales budget: Unit sales in June, July, and August are 20,000, 18,000, and 17,000, respectively. The selling price per unit is $80. All sales are on account. 20% of sales are collected in the month of sale and 80% are collected in the next month. What are the budgeted sales for July? Multiple Choice $1,440,000 $1,600,000 $288,000 $1,152,000
The Willows Company accounts for its sales on installment basis. Provided below are the beginning and ending balances: Jan. 1, 2021 Dec. 31, 2021 Installment accounts receivable – 2019 140,000 40,000 Installment accounts receivable – 2020 240,000 80,000 Installment accounts receivable – 2021 200,000 42,000 Deferred gross profit – 2019 Deferred gross profit – 2020 Deferred gross profit – 2021 ? 60,000 ? ? Installment sales – 2021 900,000 Cost of installment sales – 2021 652,500 Compute for the following: Installment Sales Transaction on Year 2019 2020 2021 Gross profit rate Realized gross profit on 2021 Deferred gross profit – Dec. 31, 2021
On December 31, 2019, the unadjusted trial balance of Tarzwell Services showed the following balances: Accounts receivable Allowance for doubtful accounts Sales $200,000 1,000 Cr. 700,000 The business has given up trying to collect $5,000 of its accounts receivable but has not yet recorded the write-off entry. The firm uses the allowance method to estimate bad-debt expense. Required a) Provide the entry for the write-off. b) If the firm uses the percent-of-sales allowance method for recording bad-debt expense, and has experienced an average 6% rate of non-collection based on sales, provide the entry to record bad-debt expense for 2019. c) Assume that after the firm recorded the $5,000 of write-offs, it determined that 18% of its remaining accounts receivable will be uncollectible under the aging method. Provide the entry to record bad-debt expense. Don't give answer in image format
Assignment 1 The following is the trial balance of Akwaaba Limited, a trading company, as at 31st December, 2016: Debit GH¢’000 Credit GH¢’000 500,000 Ordinary shares 14,500 8% Loan notes (2012 – 2017) 2,500 10% Preference shares (redeemable) 3,000 Revaluation surplus 800 General reserve 1,500 Retained earnings – 1/1/2016 3,600 Administration expenses 8,540 Selling & distribution expenses 5,600 Sales 68,865 Inventory - 31/12/2016 3,150 Cost of sales 35,500 Loan Note interest paid 195 Investment income 360 Leasehold building at valuation-1/1/2016 14,000 Plant and equipment– cost/depreciation 13,750 3,200 Computer equipment– cost/depreciation 7,200 2,000 Motor vehicles – cost/depreciation 1,500 400 Investment property 8,700 Trade receivables 9,200 Bank 910 Trade payables…

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