Question a: Green Ltd has annual sales of €3.85 million, gross profit margin of 37%, its debtors pay on average in 60 da
Posted: Wed May 04, 2022 6:22 am
Question a: Green Ltd has annual sales of €3.85 million, gross
profit margin of 37%, its debtors pay on average in 60 days. The
company is considering increasing the credit period given to its
customers to 90 days and the financial manager estimates that all
customers will take the extra credit and sales will increase by
12%., but bad debts will increase by €28,000 per year. The company
pays 8% per year on its bank overdraft. Required: Decide whether
the change in credit policy of Green Ltd is acceptable or not (10
marks)
Question b: Explain the relationship of nominal interest and
real interest and which one should be used by companies in decision
making (2 marks)
Question c: Grey Ltd has an accounts receivables turnover of 9,5
times, an inventory turnover of 3 times and payables turnover of 7
times. Required: Calculate the cash operating cycle of the company
assuming the year has 365 days. (2 marks)
Question d: In 2020 Black Ltd made profit before taxation of
€3.750.000, taxation was €850.000, the share capital was €3.000.000
(ordinary shares of €0.50 each) and €5.000.000 7% preference
shares. Required: Calculate the earnings per share for 2020. (2
marks)
profit margin of 37%, its debtors pay on average in 60 days. The
company is considering increasing the credit period given to its
customers to 90 days and the financial manager estimates that all
customers will take the extra credit and sales will increase by
12%., but bad debts will increase by €28,000 per year. The company
pays 8% per year on its bank overdraft. Required: Decide whether
the change in credit policy of Green Ltd is acceptable or not (10
marks)
Question b: Explain the relationship of nominal interest and
real interest and which one should be used by companies in decision
making (2 marks)
Question c: Grey Ltd has an accounts receivables turnover of 9,5
times, an inventory turnover of 3 times and payables turnover of 7
times. Required: Calculate the cash operating cycle of the company
assuming the year has 365 days. (2 marks)
Question d: In 2020 Black Ltd made profit before taxation of
€3.750.000, taxation was €850.000, the share capital was €3.000.000
(ordinary shares of €0.50 each) and €5.000.000 7% preference
shares. Required: Calculate the earnings per share for 2020. (2
marks)