Representations at the time of raising 500 million

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representations” at the time of raising $500 million from its shareholders. MG has also caused the ire of the many dairy farmers who supply their milk to MG. At the start of the financial year MG promised to pay their suppliers on a basis of $5.60 for every kilogram of milk solids. However, in May 2016 MG announced that they have changed the price to $4.75 and would seek repayment of the overpayment they had paid farmers from the start of the financial year, July 2015. MG has made this decision based on the world over-supply of milk. Many dairy farmers are likely to have to borrow more from banks and already many dairy farmers rely on bank loans to fund their businesses. They believe the new price is just below the break-even point of $5 per kilogram of milk solids in costs to operate their farms. The price of MG’s shares has fallen from $2.14 to 95.5 cents and many dairy farmers hold shares in MG.Based on the above:(a) Outline with reasons what you expect will be the impact on the balance sheet of a dairy farmer.(3 marks)(b) Outline with reasons what you expect will be the impact on the income statement of a dairy farmer.(3 marks)(c) Outline what you expect will be the impact on the cash flow statement of a dairy farmer.20
(2 marks)(d) Explain how MG would record the legal action in its Statement of Financial Position at the end of the 2016 financial year?(2 marks)
Return on assets:Earnings before interest and taxAverage Total AssetsProfit margin:Earnings before interest and taxSales or Total revenueAsset turnover:Sales or Total revenueAverage Total AssetsGross profit margin:Gross profitSalesMark-up:Gross profitCost of SalesExpense ratios:Expense itemSalesInventory turnover (number of days):Average Inventory x 365Cost of SalesReceivables turnover (number of days): Average Receivables x 365SalesPayables turnover Average Payables x 365(number of days):Cost of SalesWorking capital or Current ratio:Current assetsCurrent liabilitiesQuick asset orCurrent assets – inventory – prepaymentsAcid test ratio:Current liabilities – overdraftDebt ratio:Total liabilitiesTotal assetsTimes interest earnedEarnings before interest and taxor Interest coverage:Borrowing costsWORKING PAGES: 22
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END OF EXAM PAPER24

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