4.1 CONCEPTS Choose the correct term to complete each of the following statements - NSC Accounting - Question 4 - 2017 - Paper 1

To complete the Cash Flow Statement, we fill in the missing amounts for cash flows from operating activities, investing activities, and financing activities as indicated:

CASH FLOW FROM OPERATING ACTIVITIES
Net Cash from Operations: R749,950
Interest paid: R(336,000)
Taxation paid: R(310,000)
Net cash from operations = R749,950 + R(336,000) + R(310,000) = R102,950

CASH FLOW FROM INVESTING ACTIVITIES
(Outflow on the sale of fixed assets): R(562,000)
(Outflow on equipment sold; no other investments were made): R0

CASH FLOW FROM FINANCING ACTIVITIES
Shares repurchased: R(310,000)
Net change in loans: R(1,000)
Net cash change + Cash equivalents at the beginning = resulting in cash equivalents at the end.

The acid-test ratio is calculated by the formula:

$ext{Acid-test ratio} = \frac{(Current ext{ }Assets - Inventory)}{Current ext{ }Liabilities}$

Using the provided figures: $= \frac{(1,186,000 - 735,000)}{1,236,000} = 0.36 ext{ (rounded to two decimal places)}$

The % return on shareholders' equity is calculated by:

$ROSE = \frac{Net ext{ }Profit ext{ }after ext{ }tax}{Total ext{ }Shareholders’ ext{ }Equity} \times 100$

Substituting values: $= \frac{1,378,600}{7,605,800} \times 100 = 18.16 \%$

Earnings per share is calculated as:

$EPS = \frac{Net ext{ }Profit ext{ }after ext{ }tax}{Number ext{ }of ext{ }shares ext{ }outstanding}$

For Brazilia Ltd: $= \frac{1,378,600}{5,000,000} = R0.28$

Grayson Ltd is not handling its working capital effectively. Indicators include a current ratio of 1.65:1 compared to Joni Ltd's 4.40:1, indicating potential liquidity issues. Additionally, the stock holding period for Grayson Ltd is longer, denoting excess stock that could constitute wasted resources.

Grayson Ltd has a higher level of gearing (debt-equity ratio) of 27% while Joni Ltd's is lower at 4%. This indicates that Grayson Ltd has a higher degree of financial risk due to more reliance on debt, while Joni Ltd maintains a conservative approach, indicating lower risk.

Grayson Ltd maintains a high dividend-payout ratio of 98%, prioritizing shareholders' returns. In contrast, Joni Ltd has a lower dividend-payout ratio of 40%, indicating a strategy focused on retaining earnings for growth opportunities.

Grayson Ltd's shares are priced at R0.67, slightly above its NAV of R1.20, indicating potential for growth. Joni Ltd, however, trades at R0.95, below its NAV of R0.425, signaling investor concerns, thus it should evaluate its strategies for improvement.