Accounting assignment

timer Asked: Nov 5th, 2016

Question description

kindly assist

question three Vasco millers Ltd. is in the process of forecasting its financial needs for the coming year ending 31 October 2003. The company attained a turnover ofSh.300 million for the current year ended 31 October 2002. The following are the summarized financial statements of the company for the year ended 31 October 2001: Profit and Loss Account Sh.’million’ Turnover 300 Profit before tax 54 Taxation 18 Profit after tax 36 Dividend 9 Retained profit 27 Balance Sheet Sh.’million’ Net Assets: Fixed assets (net) Current assets Current liabilities 146 103 Financed by: Issued ordinary shares 50 Reserves Sh.’million’ 190 43 233 90 140 Medium and long-term Debt 93 233 From past experience, it has been disclosed that each additional Sh.1 of sales made by the company requires, on average, a total investment in fixed assets, stocks and debtors of Sh.1.50. The Sh.1 additional sales also results in the generation of automatic financing of 40 cents as various creditors spontaneously arise with the increase in sales. The net profit margin after tax and the dividends payout ratio which apply for the year ended 31 October 2002 will also be relevant into the foreseeable future. Required: (a) The amount of external finance that will be needed during the year ending 31 October 2003 if sales are expected to increase by 15% in the year. (4 marks) (b) The maximum expected sales growth that can be achieved in the year ending 31 October 2003 if only internally generated funds are used. (6marks) (c) The maximum growth in sales that can be achieved in the year ending 31 October 2003 if the company wishes to maintain its current level of financial gearing. (6 marks) (d) Briefly comment upon the weaknesses of the method of forecasting used above. (4 marks)

Tutor Answer

(Top Tutor) Studypool Tutor
School: UT Austin
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags
Study Guides

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors