QUESTION 3 HAS FOUR PARTS (A, B, C, D) FOR A TOTAL OF 32 MARKS Aplus Pte. Ltd. is a multinational corporation based in S

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QUESTION 3 HAS FOUR PARTS (A,
B, C, D) FOR A TOTAL OF 32 MARKS
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)
Cash
980
Accounts
receivable
900
Inventory
1,200
Property, plant, and equipment
(PPE)
3,000
Accumulated
depreciation
(300)
Total assets
5,780
Accounts payable
450
Long-term debt
3,000
Capital stock
1,500
Retained earnings
830
Total liabilities and
equity
5,780
Income Statement (AUD
thousands)
Sales
12,000
Cost of goods sold
(COGS)
9,000
Net income
1,180
Dividends
(350)
Retained earnings
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
(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]