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2 marksFinancial Statement Analysis and Interpretation

CAPE Accounting Unit 1 · 2019 · Paper 2 · Question 3(a)(ii)

Rainbow Corp comparative Statement of Financial Position and Statement of Comprehensive Income for 2017 and 2016 are provided. All sales are made on credit.

Calculate the gross profit margin for 2017.

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Other parts of this question

  1. 3(a)(i)Calculate the acid-test ratio for 2017.[2 marks]
  2. 3(a)(iii)Calculate the net income margin for 2017.[2 marks]
  3. 3(b)(i)Assess the performance of Rainbow Corp for 2017 in terms of inventory turnover.[6 marks]
  4. 3(b)(ii)Assess the performance of Rainbow Corp for 2017 in terms of average collection period.[6 marks]
  5. 3(c)Distinguish between 'solvency analysis' and 'profitability analysis', giving TWO examples of a ratio used in EACH analysis.[4 marks]
  6. 3(d)(i)Office equipment which had a cost of 200 000, and on which there was accumulated depreciation of 90 000 on the day of the sale, was sold for $120 000.[4 marks]
  7. 3(d)(ii)Land with an acquisition price of 460 000 was purchased with a cash payment of 210 000 and a long-term mortgage for the remainder.[4 marks]
  8. 3(d)(iii)The board of directors declared cash dividends totalling 120 000 during the current year. The comparative balance sheet indicates dividends payable of 40 000…[3 marks]
  9. 3(d)(iv)The issue of a total of 9000 common stock, 10 par with 7000 for cash and 2000 via a stock dividend at a price of 17 per share.[2 marks]

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