Calculate appropriate profitability, liquidity, asset turnover, inventory holding period, trade receivables collection period, and investment ratios for both 2022 and 2023.

Business School Suite

Level 0 Examination

FACULTY OF SOCIAL and APPLIED SCIENCES

CONTEMPORARY ISSUES in ACCOUNTING

U10473

JUNE INTAKE  2024

INSTRUCTIONS TO CANDIDATES

Time allowed: TWO hours.

Nonprogrammable calculators may be used.

Working papers and supporting calculations must be submitted.

Candidates must NOT start writing their answers until told to do so.

SUPPLEMENTARY INSTRUCTIONS

Any calculations and workings need only be made to the nearest £.

Candidates must answer ALL THREE questions.

Question 1 (50 marks)

You are presented with the following information relating to Shoe Limited.

Additional information:

1. All sales and all purchases are on credit terms.
2. The opening stock at 1 April 2021 was £20,000
3. There were no accruals or prepayments at the end of either 2022 or 2023.
4. Assume that both the tax and the dividends had been paid before the end of the year.
5. The market price of the ordinary shares at the end of both years was estimated to be 126p and 297p respectively.

Required

(a) Calculate appropriate profitability, liquidity, asset turnover, inventory holding period, trade receivables collection period, and investment ratios for both 2022 and 2023.

(22 marks)

(b) Comment on the company`s financial performance for the year to 31 March 2023. (28 marks)

Question 2      (20 marks)

Assume that you a personnel officer in a manufacturing company and that one of your employees is a young engineering manager called Jonathan.Jonathan has been chosen to attend the local university’s business school to study for a diploma in management.Jonathan is reluctant to attend the course because he will have to study accounting.As an engineer he thinks that it will be a waste of time for him to study such a subject.  

Required:

Write to Jonathan explaining why would be of benefit to him to study accounting.Your report should include references to both financial accounting and management accounting.                     (20 marks)                                                                                            

Question 3  (30 marks)

Joshua produces go-karts which he sells to local retailers. He has decided to produce a sales and trade receivables budget to help him plan ahead. The following data are available for January to June 2025.

• Each go-kart will be sold for £50 for the first four months, then the selling price will rise to £60.
• He gives two months’ credit to the retailers.

  Required:

Produce a sales budget and a trade receivables budget for the six months ending 30 June 2025                                                                                                    (30 marks)