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]