Reference no: EM133061949
Question - Tudo Ltd's Statement of Financial Position for the 2020 and 2019 financial years are presented below:
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Assets
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2020
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2019
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Non-current Assets
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5,000,000
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4,700,000
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Inventory
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600,000
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700,000
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Receivables
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300,000
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320,000
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Cash
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300,000
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100,000
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6,200,000
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5,820,000
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Equity and Liabilities
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2020
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2019
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Share Capital (R2 shares)
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2,400,000
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2,200,000
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Share Premium
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600,000
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200,000
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Retained Income
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550,000
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400,000
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Long term Debt
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2,000,000
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2,100,000
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Payables
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650,000
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920,000
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6,200,000
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5,820,000
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Additional information:
1. Tudo's shares are currently trading at R3.20 per share.
2. Replacement cost of assets is R6,000,000. Their abbreviated Statement of Comprehensive Income for the year ended 2020 appeared as follows:
Sales (75% on credit) 2,000,000
Cost of sales (all purchases on credit) 850,000
Depreciation 80,000
Interest expense 90 000 Tax (30%) 160,000
Net Income after tax 300,000
Dividends 150,000
Retained Income 150,000
Required -
1. Calculate the current ratio for 2020 and comment.
2. Calculate the debtors' collection period for the current year. Note: Debtors terms: 60 days net. The ratio for 2019 was 66 days.
3. Calculate the following ratios for 2020:
3.1 Earnings per share.
3.2 Dividends per share. Would shareholders be happy with this dividend? Explain.
4. Calculate the Market to Book Ratio and explain the relevance of this ratio to decision makers.
5. Calculate the Price Earnings ratio for 2020 and explain the significance of this ratio.
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