Question 1

Note: Calculations should be rounded to 1 decimal place. Units of measure should be

provided.

PART A

Tornado Ltd is a Cape Town basedretail group which is listed on the JSE. The following is an
extract of their trial balance for the year ended 30 September 2013:

2013 2012
Inventory 7 101 000 5 367 400
Trade receivables 1 243 900 943 700
Trade payables (6 209 200) (5 605 400)
Sales 47 466 500 41 128 100
Cost of sales (27 411 000) (22 443 200)

Additional information:

1. 55% of Tornado’s sales are for cash, the rest are credit sales.
2. Credit purchases increased by 23% in 2013. Credit purchases amounted
R28 567 500 in 2012.
3. The days inventory on hand in 2013 was 94.6 days (2012: 87.3 days)
4. The debtors collection is 18.6 days and creditors payment is 71.6 days – for 2012
5. The working capital cycle for 2012 is 34.3 days.

You are required to:

1. Calculate the working capital cycle of Tornado Ltd for 2013. (5 marks)

2. Explain whether this ratio has improved or declined in the 2013 financial year.(2
marks)

PART B

The following information is available to you for the sector and for Tornado Ltd for the year
ended 30 September 2013:

Sector information
Return on investment 30%
Price earnings ratio 25.2 times

Tornado Ltd
Headline earnings per share 1 650 cents
Earnings per share 1 405 cents
Dividends per share 270 cents
Number of shares in issue, 30 September 2013 375 million
Share price, 30 September 2013 R364.00
Share price, 30 September 2012 R318.80
You are required to:

1. Calculate the return on investment of Tornado Ltd on 30 September 2013. (1 mark)

2. Calculate the price earnings ratio of Tornado Ltd on 30 September 2013. (1 mark)

3. Comment briefly on what the price earnings ratio calculated in part 2 indicates about
Tornado Ltd on 30 September 2013, with reference to the sector average. (2 marks)

4. Give ONE reason that the market capitalisation (MC) of most listed companies is
considerably higher than their net asset value (NAV). (1
mark)

Question 2

Note: calculations should be rounded to 1 decimal place.Units of measure should be

provided.

You have been provided with the following figures extracted from the annual financial
statements of Woolworths Holdings Limited (WHL) for the financial year ended 30 June 2013.

2013 2012

R’m R’m

Sales 35 227 28 604

Cost of sales 21 674 18 419

Profit before interest and tax 3 469 2 687

Finance costs 68 38

Profit for the year 2 638 2 059

Inventories 2 901 2 216

Trade receivables 668 631

Cash and cash equivalents 1 562 2 145

Current liabilities 4 376 4 296

Earnings per share 337.9 cents 269.2 cents

Headline earnings per share 340.4 cents 267.3 cents

Share price at reporting date 6 441 cents 5 039 cents

REQUIRED:

1. Calculate the collection period for WHL for the 2013 reporting period. (1 mark)
2. Calculate the interest cover of WHL for the 2013 reporting period. (1 mark)
 3. Using your answer to part 2, comment on the risk for WHL associated with its interest,
and any changes from the 2012 reporting period. The interest cover was calculated at
71 times in 2012.
(2 marks)
4. Calculate the acid test ratio of WHL for the 2013 reporting period. Assume that all
current assets are listed above. (1 mark)
5. Briefly discuss the difference between the acid test ratio and the current ratio, and why
an analyst would be interested in both. There is no need to refer to WHL specifically.
(2 marks)
6. Calculate the price earnings ratio of WHL for the 2013 reporting period. (1 mark)

Question 3

Note: calculations should be done to 1 decimal place.

QUESTION ONE (3 marks)

State three questions an investor may ask when undertaking a common sense overview of a
statement of financial position.

QUESTION TWO (3 marks)

The return on assets (ROA) forms a major component of the return on equity (ROE)ratio.
There are two key drivers of the ROA ratio. Name them and briefly explain what each
measures. (Formulas are NOT required.)

QUESTION THREE (4 marks)

The following summarised data has been extracted from the 2013 integrated report of Pretoria
Portland Cement (PPC), the leading cement manufacturer in southern Africa:

2013 2012
Rm Rm
Total assets 8876 6907
Total borrowings 6734 5731
Revenue 8316 7346
Gross profit 2770 2537
Net profit after tax 931 846
Cash generated from operations 2885 2 284

a) Calculate the return on equity of PPC for 2013 and 2012. (2 marks)

b) Calculate the total asset turnover for 2013 and suggest one reason why it is different from
the 2.82 times calculated for Mr Price in 2013. (2 marks)

Question 4
The following results relate to Life Healthcare Ltd, a private hospital group of companies, for
the year ended 30 September 2012:
 2012 2011

Sales R10 937m R9 812m

Net Profit R1 743m R1 492m

Total assets R9 256m R8 468m

Equity R3 941m R3 518m

You are required to:

1. What does it mean if a business is solvent? (1 mark)

2. Describe the 3 key drivers of return on equity for a company. In other words, what
three things should a company do in order to maximise shareholders’ wealth? (3 marks)

3. Calculate the asset efficiency (return on assets) for Life Healthcare Ltd for 2012
(2011:1.16 times) (1 mark)

4. Comment on the movement in asset efficiency between the two years, and briefly
indicate the reasons for the change. (2 marks)

5. Calculate the profitability or margins (net margin) of Life Healthcare Ltd for 2012
(2011:15.2%) and comment on the movement and briefly indicate the reason for the
change. (3 marks)

business has become more efficient in managing its costs. Alternatively they may have
increased their gross profit margin. The business currently retains 15.9c per rand it receives
in sales.