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Good day Tutor.
Kindly help
Here’s the question below.
PIND CO
The following information is available for Pind Co, a manufacturing company.
You are
provided with an extract from the Statement of Profit or Loss:
$
Operating profit 42,000
Interest charges (16,000)
––––––
Profit before tax 26,000
Taxation (5,460)
––––––
Profit after Tax. 20,540Pind Co has an operating profit margin of 15%.
You are provided with an extract from its
Statement of Financial Position:
$
Equity and reserves
Total equity and reserves 420,000Non-current liabilities
Loan 150,000
5% Preference shares. 40,000Current liabilities
Payable. 50,000If Pind Co has a receivables to cash ratio of 2.25, what is the receivable days to the nearest whole number?
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – it has answers and explanations!
This is more of a financial accounts question than a Paper PM question, and I don’t think that you can have typed out the whole question (or else there is an error in the question) because there is no mention of any non-current assets.
Given that the operating profit margin is 15%, the total sales are $42,000/15%.
The total assets are the ‘missing figure’ on the SOFP, and assuming that there are non-current assets then the current assets are the remainder.
If we assume that there is no inventory (which would be strange) and therefore only receivables and cash, then the receivables will be 2.25/3.25 times the total current assets.
Given that you now will have the receivables and the total revenue, it should be no problem calculating the receivables days (assuming that all sales are on credit).
I don’t know where you found this question, but assuming that you have copied it correctly it is a very poor question indeed.
I copied it from the kaplan kit and hence i was confused with the solution, they only said its 26 days but i dont understand how they got that
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