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MAC2602 EXAM PACK 2023
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MAC2602 EXAM PACK 2023
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MAC2602EXAM PACK
LATEST
2023
,SOLUTION 1: ANALYSIS OF FINANCIAL
INFORMATION & WORKING CAPITAL
MANAGEMENT
a) Operating profit margin
𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕
(i) Formula = ( 𝑹𝒆𝒗𝒆𝒏𝒖𝒆
∗ 𝟏𝟎𝟎)
182 872
= (391 606 ∗ 100)
= 𝟒𝟔. 𝟕𝟎%
(ii) The operating profit margin is the operating profit expressed as a
percentage of revenue.
(iii) This might be high because of the gross profit margin which is high at
72.33%. The decrease from the gross profit percentage of 72.33% to a an
operating profit margin of 46.70% can be mainly attributed to the high
operating costs.
b) Receivables Days
𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
(i) Formula = ( 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔 ∗ 𝟑𝟔𝟓)
16 984
= [(391 606 ∗ 60% ∗ 1.15)
∗ 365)
= 𝟐𝟐. 𝟗𝟒 𝒅𝒂𝒚𝒔
(ii) This calculation measures the number of days it takes for credit sales to be
converted into cash, or for the average debtor to pay his debt.
(iii) The entity is performing well considering that its trade payables days at
22.94 days is below the industry average which is 30 days.
4
QUEENTINE MIRACLES
,c) Payables Days
𝑷𝒂𝒚𝒂𝒃𝒍𝒆𝒔
(i) Formula = ( 𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔 ∗ 𝟏𝟐)
61 490
= (119 920 ∗ 12)
= 𝟔. 𝟏𝟓 𝒎𝒐𝒏𝒕𝒉𝒔
Purchases = (𝑪𝒐𝒔𝒕 𝒐𝒇 𝑺𝒂𝒍𝒆𝒔 + 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 − 𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚)
= (108 350 + 34 098 − 22 528)
= 𝑹𝟏𝟏𝟗 𝟗𝟐𝟎
(ii) This calculation measures the number of months it takes for the
organisation to pay its creditors.
(iii) The period will be acceptable if they are within the credit period being
granted by creditors but if the period exceeds the credit period granted by
suppliers, it might strain the relations with suppliers
d) Inventory days
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
(i) Formula = ( 𝑪𝒐𝒔𝒕 𝒐𝒇 𝑺𝒂𝒍𝒆𝒔 ∗ 𝟑𝟔𝟓)
34 098
= (108 350 ∗ 365)
= 𝟏𝟏𝟒. 𝟖𝟕 𝒅𝒂𝒚𝒔
(ii) This calculation measures the days of sales in inventory and indicates the
period an inventory item will lie in stock from its purchase (in the case of a
reseller) or production (in the case of a manufacturer) up to date of sale.
(iii) The entity might be purchasing in bulky as indicated by the increase from
an opening inventory value of R22 528 000 to closing inventory value of
R34 098 000 which causes the inventory days to be high.
5
QUEENTINE MIRACLES
, e) Total Assets to total debt ratio
1. Based on book values
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
(i) Formula = ( )
𝑻𝒐𝒕𝒂𝒍 𝑫𝒆𝒃𝒕
1 170 648
= [(145 035 + 157 245 )]
= 𝟑. 𝟖𝟕 𝒕𝒊𝒎𝒆𝒔
(ii) This ratio indicates the number of times debt is covered by assets.
(iii) The asset to debt using book values of 3.87 times is greater than the asset
to debt using market values (3.65 times). This is due to the market value of
assets being lower than the book value of assets.
2. Based on market values
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
(iv) Formula = ( 𝑻𝒐𝒕𝒂𝒍 𝑫𝒆𝒃𝒕
)
1 102 280
= [ 302 280 ]
= 𝟑. 𝟔𝟓 𝒕𝒊𝒎𝒆𝒔
Market Value
R (000)
Equity (50 000 ∗ 16) 800 000
Debt (145 035 + 157 245) 302 280
Total Market Value 1 102 280
6
QUEENTINE MIRACLES
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