Reference no: EM132379410
QUESTION
Use the data provided to answer the questions that follow relating to Newtech Ltd for 2017:
Abbreviated Statement of Financial Position:
|
Assets
|
|
2017
|
|
2016
|
|
Non Current/Fixed
|
4
|
200
|
000
|
|
3 000 000
|
|
Inventory
|
|
400
|
000
|
|
600 000
|
|
Receivables
|
1
|
550
|
000
|
1
|
200 000
|
|
Cash
|
|
600
|
000
|
|
300 000
|
|
|
|
|
|
|
|
6
|
750
|
000
|
5
|
100 000
|
|
|
|
|
|
|
|
Equity and Liabilities
|
|
|
|
|
|
|
|
Share Capital (R2 shares)
|
4
|
200
|
000
|
4
|
000
|
000
|
|
Retained Income
|
|
600
|
000
|
|
300
|
000
|
|
Long term Debt
|
|
250
|
000
|
|
200
|
000
|
|
Payables
|
1
|
700
|
000
|
|
600
|
000
|
|
|
|
|
|
|
|
|
6
|
750
|
000
|
5
|
100
|
000
|
|
|
|
|
|
|
|
|
The abbreviated Statement of Comprehensive for the year ended 2017:
|
|
Sales (10% on credit)
|
10 200 000
|
|
Cost of sales (80% on credit)
|
4
|
080
|
000
|
|
Expenses
|
3
|
200
|
000
|
|
Net Income after Tax
|
2
|
000
|
000
|
|
Dividends
|
1
|
700
|
000
|
|
Retained Income
|
3
|
000
|
000
|
NB: Shares are currently trading at R2. 80 per share. Required
1 Calculate the net profit on turnover for 2017.
2 Calculate the earnings yield and dividend yield for 2017 and explain their significance to (prospective) shareholders.
3 Accounts Payable Turnover
3.1 Calculate the accounts payable period (in days), noting that Newtech Ltd has, after tough negotiations secured a 90 day account with all its creditors.
Note: Use average accounts payable for this calculation.
3.2 Is this an ideal situation? Offer constructive advice to Newtech Traders.
4 Calculate the return on equity. Would shareholders be happy with the current return? Why/why not?
5 Calculate the inventory turnover ratio (use average inventory) and explain the significance of this ratio.
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