Page 450 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 20

Example 19.1 cont'd

Efficiency/activity ratios:

20X6 20X5
Inventory holding Inventory 38/163 × 365 30/150 × 365
period Cost of sales × 365 days = 85 days = 73 days

Receivables Receivables × 365 days 123/450 × 365 93/375 × 365
collection period Revenue = 100 days = 91 days

Payables Trade payables 30/163 × 365 28/150 × 365
payment period Cost of sales × 365 days = 67 days = 68 days

(The following 2 ratios are not required per question but included for reference)

Revenue 450/(445 + 938 + 23 – 275/(250 + 275)
Asset turnover
Capital employed 625) = 0.58 times = 0.71 times
Revenue
Non-current 450/665 = 0.68 times 375/475
asset turnover NCAs (that cont. = 0.79 times
to revenue)

Capital structure ratios:

20X6 20X5

Debt (938 + 23)/(938 + 23 + 445) 275/(275 + 250)
Gearing
Debt + Equity = 68.3% = 52.4%

Gearing Debt (938 + 23)/445 = 2.2:1 275/250 = 1.1:1
alternative Equity

NB. Gearing may be shown as a % or a ratio. The exam question will make it
explicit regarding how to present your answer.

Operating profit
Interest cover 87/60 = 1.5 times 152/26 = 6.1 times
Finance costs
Profit for year
Dividend cover 140/63 = 2.2 times 94/63 = 1.5 times
Dividends

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