- The following balance sheet was prepared by the management of Mambo Ltd. as at 31 December 2007.(Solved)
The following balance sheet was prepared by the management of Mambo Ltd. as at 31 December 2007.
The management of the company is evaluating the expected financial requirements for the year
ending 31 December 2008 and has sought your advice as a financial consultant.
The following additional information has been provided to you:
1. Sales revenue for the year ended 31 December 2007 was sh. 20 million while the projected
sales revenue for the year ending 31 December is sh. 24 million.
2. Total assets and current liabilities for year 2008 are expected to increase in the same proportion
as the increase in sales revenue.
3. The average after tax net profit margin of 8% per annum is expected to be maintained in year 2008.
4. The current dividend payout ratio of 70% is also expected to be maintained in the year 2008.
5. Any additional finance required in year 2008 would be obtained through bank loans.
Required:
i) The amount additional long term required in year 2008, if any, to finance the expected increase
in net assets.
ii) Projected balance sheet of the company as at 31 December 2008.
Date posted: May 5, 2022. Answers (1)
- The following summarized financial statements relate to Jasmine Ltd. for the year ended 31 October 2008.
The company is in the process of preparing a financial...(Solved)
The following summarized financial statements relate to Jasmine Ltd. for the year ended 31 October 2008.
The company is in the process of preparing a financial budget for the year ending 31 October 2009.
Additional information:
1. From past experience, the management of the company have determined that for each sh. 1.00
of additional sales, total investment of sh. 1.50 in fixed assets, stock and debtors would be
required.
2. The management have also determined that for each sh. 1.00 of additional sales, the company
would require trade credit amounting to sh. 0.60.
3. The company has maintained a constant dividend payout ratio.
4. Any requirements for internal funds are to be met from the retained earnings for the year
ending 31 October 2009.
Required:
i) External finance (if any ) required in year 2009 assuming that the sales for the year increase
by 20%
ii) Expected maximum growth in sales in year 2009 assuming that the company only utilizes
internal funds.
iii) Briefly explain three limitations of your estimates in (b) (i) and (ii) above.
Date posted: May 5, 2022. Answers (1)
- Sunrise Limited presented the following financial statements for the year ended 31 December 2008:(Solved)
Sunrise Limited presented the following financial statements for the year ended 31 December 2008:
Assume a 360 – day year.
Required:
i) Operating cash style
ii) Quick ratio
iii) Current ratio
iv) Debt to equity ratio
v) Operating margin ratio
vi) Debt turnover ratio
Date posted: May 5, 2022. Answers (1)
- Faidika Ltd. has an issued share capital of sh. 200 million which is made up of 8 million ordinary shares each of sh. 25 par...(Solved)
Faidika Ltd. has an issued share capital of sh. 200 million which is made up of 8 million ordinary shares each of sh. 25 par value.
The income statement of the company for the year ended 31 December 2008 was as follows.
Date posted: May 5, 2022. Answers (1)
- The following information relating to Kawaida Ltd. Was obtained from the financial statements of the company for the year ended 30 November 2009.(Solved)
The following information relating to Kawaida Ltd. Was obtained from the financial statements of the company for the year ended 30 November 2009.
Date posted: May 5, 2022. Answers (1)
- The following statement of financial position relates to Mageuzi Ltd. as a t 31 December 2009.(Solved)
The following statement of financial position relates to Mageuzi Ltd. as a t 31 December 2009.
Additional information:
1. Sales in the in the year ended 31 December 2009 amounted to sh. 20 million. The sales for the
current year ending 31 December 2010 are expected to increase by sh. 4 million.
2. The net profit margin and retention ratio for the year ended 31 December 2009 were 8 % and 30%
respectively. These ratios are expected to be maintained in the foreseeable future.
3. All assets and current liabilities are expected to change in the current year ending 31 December
2010 at the same percentage as the change in sales.
Required:
i) The amount of external financial requirements for the year ending 31 December 2010.
ii) A proforma statement of financial position as at 31 December 2010.
Date posted: May 5, 2022. Answers (1)
- Explain the purpose of financial ratio analysis and why a careful reading of the financial statements is not enough.(Solved)
Explain the purpose of financial ratio analysis and why a careful reading of the financial statements is not enough.
Date posted: May 5, 2022. Answers (1)
- Highlight three problems that could be faced by a firm with a high gearing level.(Solved)
Highlight three problems that could be faced by a firm with a high gearing level.
Date posted: May 5, 2022. Answers (1)
- The following statement of financial position was extracted from the books of XYZ Ltd. for the year ended 31 March 2011 and 31 March 2012.(Solved)
The following statement of financial position was extracted from the books of XYZ Ltd. for the year ended 31 March 2011 and 31 March 2012.
Date posted: May 5, 2022. Answers (1)
- The following data was obtained from the summarised statement of financial position of Ngamani Ltd. as at 30 November 2012:(Solved)
The following data was obtained from the summarised statement of financial position of Ngamani Ltd. as at 30 November 2012:
Date posted: May 5, 2022. Answers (1)
- The following data was obtained from the books of Chepe Ltd. for the year ended 30 November 2012:(Solved)
The following data was obtained from the books of Chepe Ltd. for the year ended 30 November 2012:
Date posted: May 5, 2022. Answers (1)
- The following data was extracted from the financial statements of Madrex Ltd. for the year ended 30 November 2012:(Solved)
The following data was extracted from the financial statements of Madrex Ltd. for the year ended 30 November 2012:
Date posted: May 5, 2022. Answers (1)
- The management of Docarex Ltd. is considering a number of funding options for a new project.
The new project could be funded by sh. 10 million...(Solved)
The management of Docarex Ltd. is considering a number of funding options for a new project.
The new project could be funded by sh. 10 million of equity or debt.
The data below was extracted from the financial statements of Decorex Ltd. under each funding option.
i. Return on capital employed (ROCE) under each of the two funding options.
ii. Return on equity under each of the two funding options.
iii. Explain the impact on the performance of Docarex Ltd. of financing by debt rather equity.
Date posted: May 5, 2022. Answers (1)
- The following data was extracted from the books of Sky Ltd. for the year ended 31 December 2012:(Solved)
The following data was extracted from the books of Sky Ltd. for the year ended 31 December 2012:
Date posted: May 5, 2022. Answers (1)
- Upendo Traders Ltd. sells merchandise on credit terms of net 50 while the industrial average credit terms are net 30.
The company makes average sales of...(Solved)
Upendo Traders Ltd. sells merchandise on credit terms of net 50 while the industrial average credit terms are net 30.
The company makes average sales of 3 million per annum. The average number of days sales in accounts receivables is 60 days.
The company is considering changing its credit terms to net 30 on all sales. This change of credit terms is expected to result in the following:
• Sales would reduce to sh. 2,600,000 per annum.
• Accounts receivable would drop to 35 days of sales.
Additional information:
1. The variable cost ratio is 70%
2. Corporation tax rate is 30%.
3. Interest on funds invested in accounts receivables is at a rate of 11% per annum.
Assume a 360 – day year.
Required:
With the aid of appropriate computations, assess whether the company should change. Its credit terms to net 30.
Date posted: April 28, 2022. Answers (1)
- The following information was extracted from the books of Shama Ltd. as at 31 December 2006.
All sales and purchases were on credit. Assume a 360...(Solved)
The following information was extracted from the books of Shama Ltd. as at 31 December 2006.
All sales and purchases were on credit. Assume a 360 – day year.
Required:
i) Operating cycle
ii) Cash conversion cycle
Date posted: April 28, 2022. Answers (1)
- The following information was extracted from the books of Changa Ltd. at the end of the financial year ended 31 October 2006 and 2007.(Solved)
The following information was extracted from the books of Changa Ltd. at the end of the financial year ended 31 October 2006 and 2007.
Required:
i) The working capital cycle (in days) of Changa Ltd.
ii) Briefly explain two ways in which Changa Ltd. might reduce its working capital style.
Date posted: April 28, 2022. Answers (1)
- The following are the projected monthly working requirements of Tayari Ltd. for the year ending 31 December 2008.(Solved)
The following are the projected monthly working requirements of Tayari Ltd. for the year ending 31 December 2008.
The expected cost of short term funds is 20% while that of long term funds is 25%.
Ignore taxation.
Required:
i) A schedule showing the amount of permanent and seasonal working capital requirements for
each month.
ii) Average amount of long term and short term finance that would be required monthly.
iii) Total cost of working capital finance if the firm adopts an aggressive strategy.
iv) The total cost of working capital finance if the firm adopts a conservative finance strategy.
Date posted: April 28, 2022. Answers (1)
- Fanaka Ltd. a large multi- national company is in the process of determining the optimal cash balance
for the year ending 31 December 2009.
The management of...(Solved)
Fanaka Ltd. a large multi- national company is in the process of determining the optimal cash balance
for the year ending 31 December 2009.
The management of the company has established the following information:
1. The company’s annual cash requirements amount to sh. 2,500 million.
2. The cost of each cash conversion transaction is sh. 500.
3. The opportunity cost of funds is 12%.
Required:
i) Optimal cash balance that the company should hold.
ii) Total cost of maintaining the cash balance determined in (b) (i) above.
Date posted: April 28, 2022. Answers (1)
- Modern Appliance Ltd. sells on average 2,000 units of product “Zed” per month. The purchase price per unit of the product is sh. 2. The...(Solved)
Modern Appliance Ltd. sells on average 2,000 units of product “Zed” per month. The purchase price per unit of the product is sh. 2. The cost of placing each order is sh. 50 and the carrying cost is 10% of the purchase price.
Required:
i) Economic order quantity.
ii) Total relevant cost per annum.
iii) Assume that the company has received a discount offer of 1% for purchases of at least 4,500 units per order
Using supporting calculations, advise the company on whether to take advantage of the discount offer.
Date posted: April 28, 2022. Answers (1)