Assets 2011 2010
Non Current Assets 4 800 000 3 300 000
Inventory 500 000 700 000
Receivables 350 000 420 000
Cash 280 000 140 000
5 930 000 4 560 000
Equity and Liabilities
Share Capital (R2 shares) 2 600 000 1 700 000
Retained Income 500 000 440 000
Long term Debt 2 000 000 1 800 000
Payables 830 000 620 000
5 930 000 4 560 000
Their abbreviated Income Statement for the year ended 2011:
Sales (75% on credit) 2 400 000
Cost of sales 1 600 000
Depreciation 80 000
Interest expense 90 000
Tax (30%) 160 000
Net Income after Tax 300 000
Dividends 240 000
Retained Income 60 000
NB: Company X is a wine retailer. Their shares are currently trading at $3 per share.
Required
1. Calculate the gross profit margin and their net profit margin.
2. Calculate the EPS and DPS for the current year. Explain what occurs to the difference between the EPS and the DPS value, from an accounting perspective.
3. Calculate the return on equity. Will shareholders be happy with this return? Explain.
4. Calculate and comment on the acid test ratio for both years.
5. Calculate and comment on the debt equity ratio for both years.
6. Calculate the stock turnover rate and explain the meaning of this ratio.
7. What is the period for which they have stock on hand? Is this acceptable? Explain.