Aplus Pte Ltd Is A Multinational Corporation Based In Singapore With A Subsidiary Cminus Ltd Operating In Australia 1 (58.59 KiB) Viewed 24 times
Aplus Pte Ltd Is A Multinational Corporation Based In Singapore With A Subsidiary Cminus Ltd Operating In Australia 2 (39.4 KiB) Viewed 24 times
Aplus Pte. Ltd. is a multinational corporation based in Singapore with a subsidiary, Cminus Ltd., operating in Australia. The CFO of Cminus has prepared the financial statements, reported in Australian dollars (AUD), to analyze the effects of how a choice of functional currency would impact certain key financial ratios. Exhibit 2: Cminus Ltd. Selected Financial Data at 31 December 2018 Balance Sheet (AUD thousands) Cashi 980 Accounts receivable 900 Inventory Property, plant, and equipment (PPE) Accumulated depreciation Total assets Accounts payable Long-term debt Capital stock Retained earnings Total liabilities and equity Sales Cost of goods sold (COGS) Net income Dividends Retained earnings Income Statement (AUD thousands) 200 3,000 (300) 5,780 450 3,000 1,500 830 5,780 12,000 9,000 1,180 (350) 830
Exhibit 3: Exchange Rates Applicable to Cminus Ltd. Date SGD/AUD 1 January 2018 0.968 Average, 2018 0.906 Weighted-average rate when inventory was acquired 0.954 1 December 2018 when dividends were declared 0.962 31 December 2018 0.971 I (3A) If Cminus Ltd. uses the Singapore dollar (SGD) as its functional currency, what would be the leverage ratio (total debt/total assets)? [10 marks] (3B) Compare the inventory turnover ratio (COGS/Inventory) under the current rate method and the temporal method. [10 marks] (3C) Compare the fixed asset turnover ratio (Sales/PPE) under the current rate method and the temporal method. [10 marks] (3D) Based on your answers to parts (3B) and (3C), explain which translation method Cminus should use, assuming it has a choice in method, if the company would like to show higher efficiency. [2 marks]
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