Use the information provided below to answer the following questions. The answers to the ratios must be expressed to two decimal places and be fully stated e.g. 2.15:1; 24.67% etc Use the appropriate ratio to determine whether Sunday Limited will be able to settle its short-term debts when business conditions are Is Sunday Limited efficient in the collection of its debts? Motivate your Will the shareholders of Sunday Limited be satisfied with their return on investment? Motivate your answer with the relevant Is Sunday Limited taking advantage of the credit terms offered by creditors? Motivate your Use the relevant ratio to determine the percentage of debt to the assets of the Comment on your answer. Compare the dividend per share with the earnings per share of Sunday Limited. What conclusions may be drawn from this? Extracts of the financial statements of Sunday Limited for 2023 are given below. Sunday Limited Statement of Comprehensive Income for the year end 31 December 2023 R Sales 1 600 000 Cost of sales 1 060 000 Operating profit 300 000 Profit before tax 280 000 Profit after tax 196 000 Statement of Financial Position as at 31 December 2023 R Non-current assets 640 000 Total assets 860 000 Current liabilities (all accounts payable) 120 000 Non-current liabilities 140 000 Note: ■ Inventories amounted to R120 000 and R100 000 on 31 December 2023 and 31 December 2022 respectively. All purchases and sales of inventories are on credit. ■ The amount owed by debtors on 31 December 2023 was R80 000. Credit terms to debtors are 30 days. ■ The suppliers of Sunday Limited allow credit terms of 60 days. ■ The ordinary share capital consisted of 500 000 shares. ■ The total dividends for the year ended 31 December 2023 amounted to R180 000.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter5: Evaluating Operating And Financial Performance

Section: Chapter Questions

Problem 4EP

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Question

Use the information provided below to answer the following questions. The answers to the ratios must be expressed to two decimal places and be fully stated e.g. 2.15:1; 24.67% etc

Use the appropriate ratio to determine whether Sunday Limited will be able to settle its short-term debts when business conditions are
Is Sunday Limited efficient in the collection of its debts? Motivate your
Will the shareholders of Sunday Limited be satisfied with their return on investment? Motivate your answer with the relevant
Is Sunday Limited taking advantage of the credit terms offered by creditors? Motivate your
Use the relevant ratio to determine the percentage of debt to the assets of the Comment on your answer.
Compare the dividend per share with the earnings per share of Sunday Limited. What conclusions may be drawn from this?

Extracts of the financial statements of Sunday Limited for 2023 are given below.

Sunday Limited

Statement of Comprehensive Income for the year end 31 December 2023

	R
Sales	1 600 000
Cost of sales	1 060 000
Operating profit	300 000
Profit before tax	280 000
Profit after tax	196 000
Statement of Financial Position as at 31 December 2023
	R
Non-current assets	640 000
Total assets	860 000
Current liabilities (all accounts payable)	120 000
Non-current liabilities	140 000

Note:

■

Inventories amounted to R120 000 and R100 000 on 31 December 2023 and 31 December 2022

respectively. All purchases and sales of inventories are on credit.

■	The amount owed by debtors on 31 December 2023 was R80 000. Credit terms to debtors are 30 days.
■	The suppliers of Sunday Limited allow credit terms of 60 days.
■	The ordinary share capital consisted of 500 000 shares.
■	The total dividends for the year ended 31 December 2023 amounted to R180 000.