View the step-by-step solution to:

Dear Tutor, can you please help to calculate the ratios for 2017 that would reflect each of the following (Where applicable, round off answers to two...

Dear Tutor, can you please help to calculate the ratios for 2017 that would reflect each of the following (Where applicable, round off answers to two decimal places.):


The profit of the company relative to sales after deducting the cost of sales.

The number of times that investors are willing to pay for each Rand of the company's earnings.

The proportion of the total assets that are financed by total debt.

The ability of the company to repay its short-term debts under distress conditions, on the assumption that inventories would have no value at all.

A measure of the dividends earned per share of common stock.

An indication of the percentage of profit that has been put back into the company.



Comment on the following ratios that have been calculated for Oasis Ltd.  

Provide two significant comments for each ratio.

Profit margin

Return on capital employed




INFORMATION

Excerpts of the financial data of Oasis Ltd for 2017 are as follows:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017

R

Sales 6 500 000

Cost of sales 4 400 000

Operating profit 664 000

Interest expense 88 000

Profit before tax 576 000

Company tax 172 800


STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

R

Assets

Non-current assets 1 960 000

Inventories 2 600 000

Accounts receivable 776 000

Cash 8 000

5 344 000

Equity and liabilities

Ordinary share capital (704 000 shares) 1 408 000

Retained earnings 1 152 000

Long-term loan (12% p.a.) 740 000

Accounts payable 1 744 000

Dividends payable (for 2017) 300 000

5 344 000

Additional information

All purchases and sales of inventories were on credit.

Inventories on 31 December 2016 amounted to R2 400 000.

The following ratios were calculated for 2017 and 2016:

2017 2016

Profit margin 6.20% 13.63%

Return on capital employed 20.12% 27.62%


The market price of the company's shares for 2017 and 2016 were R4.00 and R3.50 respectively.


Thank you loads

Top Answer

The profit of the company relative to sales after deducting the cost of sales. The number of times that investors are willing... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online