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Flowers

The document presents financial data for Flowers Ltd, including its statement of financial position and profit or loss for the year ended 30 September 2014. It requires the calculation of various financial ratios such as current ratio, quick ratio, return on total assets, and dividend yield, as well as return on equity using DuPont analysis. Additionally, it discusses the limitations of the return on equity ratio from a shareholder's perspective.

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21 views2 pages

Flowers

The document presents financial data for Flowers Ltd, including its statement of financial position and profit or loss for the year ended 30 September 2014. It requires the calculation of various financial ratios such as current ratio, quick ratio, return on total assets, and dividend yield, as well as return on equity using DuPont analysis. Additionally, it discusses the limitations of the return on equity ratio from a shareholder's perspective.

Uploaded by

kgomotsomahloko11
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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QUESTION 4 17 MARKS

Flowers Ltd is a company listed on the Johannesburg Stock Exchange (JSE). The current market
value of the company’s ordinary shares is R5 500 000.

The following annual financial statements of Flowers Ltd are presented to you:

Statement of financial position as at 30 September 2014

2013 2014
R ‘000 R ‘000
ASSETS
Non-current assets 41 600 32 700
Property, plant and equipment 41 600 32 700
Current Assets 41 400 77 000
Inventory 16 800 32 000
Trade and other receivables 22 200 41 400
Cash and cash equivalents 2 400 3 600
Total Assets 83 000 109 700

EQUITY AND LIABILITIES


Share capital and reserves 54 550 56 800
Share capital (100 000 ordinary shares) 1 200 1 200
Retained earnings 53 350 55 600
Non-current Liabilities 8 100 6 300
Long-term loans 8 100 6 300
Current Liabilities 20 350 46 600
Trade and other payables 17 350 38 600
Short-term loans 3 000 8 000
Total Equity and Liabilities 83 000 109 700

Extract from the statement of profit or loss and other comprehensive income for the year
ended 30 September 2014

2014
R ‘000
Sales 30 000
Cost of sales 18 000
Gross Profit 12 000
Depreciation 4 000
Profit before interest and tax expenses 8 000
Finance costs 3 000
Profit before tax 5 000
Income tax expense 1 500
Profit for the year 3 500
During the current year, dividends of R1 250 000 (2013: R950 000) were declared and paid.

REQUIRED:

1. Calculate the following ratios for 2014 for Flowers Ltd and provide an interpretation of each:

a) Current ratio;

b) Quick ratio;

c) Return on total assets (use earnings before interest and tax)

d) Dividend yield (9)

(Round off to two decimals and do not use averages)

2. Calculate the return on equity for Flowers Ltd for 2014 and interpret your answer by breaking it
down into its direct component parts using the DuPont analysis. Round off to two decimals. (6)

3. Discuss any possible limitations of the return on equity ratio and why it could be seen as
limitations by shareholders. (2)

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