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5.1 Choose a term from the list below that answers the specific following questions - NSC Accounting - Question 5 - 2019 - Paper 1
Question 5
5.1 Choose a term from the list below that answers the specific following questions. Write only the term next to the question numbers (5.1.1 to 5.1.4) in the ANSWER ... show full transcript
Worked Solution & Example Answer:5.1 Choose a term from the list below that answers the specific following questions - NSC Accounting - Question 5 - 2019 - Paper 1
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5.1.3 Will shareholders be satisfied with the benefit that they receive for investing in the company?
Answer
The suitable term here is return on equity (ROE). This financial metric measures the profitability of a company in generating profits from the equity that shareholders have invested.
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5.2.2 Calculate the following amounts for the Cash Flow Statement.
Answer
Cash effects of investing activities:
- Fixed assets purchased: (R580,400)
- Proceeds from sale of fixed assets: R111,800
- Increase in fixed deposit: (R50,000)
- TOTAL Cash effects: R(518,600)
Net change in cash and cash equivalents: R377,700
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5.2.4 Calculate the following financial indicators on 28 February 2019:
Answer
Acid-test ratio = (Current Assets - Inventories) / Current Liabilities = (R288,300 - R111,800) / R553,600 = 0.32:1
Debt-equity ratio = Total liabilities / Total equity = (R1,400,000 + R953,600) / (R7,557,600 + R311,000) = 0.19:1
% return on average shareholders’ equity (ROSE) = (Net profit / Average shareholders' equity) * 100 = (R293,100 / R7,700,800) * 100 = 3.81%
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5.2.8 Explain how the repurchase of the shares benefited Martha’s shareholding.
Answer
After the repurchase, Martha's ownership percentage increased. Prior to the repurchase, she owned 475,000 shares out of 900,000. After repurchase, total shares were reduced, benefiting her by boosting her stake value.