AccountingQUESTION 3BJs Ltd manufactures products that are used in the construction industry. The company has been successful in the management of its working capital and liquidity. However, 2020 has been different. Calculate the working capital and liquidity ratios for BJs Ltd given the following financial informationThe following is an extract of the trading account in the income statement: 20202019 R'000R'000Sales2,0651,789Cost of sales(1,479)(1,304)Gross profit586485Extract Statement From financial positionAssets20202019 R'000R'000Current Assets Inventory119109Debtors (refer to note1)401347Short term investments419Cash4848 572523EQUITY AND LIABILITIES Noncurrent liabilities4935Taxes6247Dividend1914Creditors (refer to note 2)371324 501420Net current assets71103Notes 1. Ammount of trades receivable in debtors amount3302852.Amount of trades payables in creditors amount226211 3.1 Calculate liquidity and working capital ratios. (posted separate) 3.2 Comment on the calculated ratios. ( on liquidity ratios plus on working capital ratios)

Liquidity ratio shows ratio of liquid assets with current liabilities of the business, that how much…

Answered: Accounting QUESTION 3 BJs Ltd…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter4: The Accounting Cycle

Section: Chapter Questions

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Accounting

QUESTION 3

BJs Ltd manufactures products that are used in the construction industry. The company has been successful in the management of its working capital and liquidity. However, 2020 has been different. Calculate the working capital and liquidity ratios for BJs Ltd given the following financial information

The following is an extract of the trading account in the income statement:

	2020	2019
	R'000	R'000
Sales	2,065	1,789
Cost of sales	(1,479)	(1,304)
Gross profit	586	485

Extract Statement From financial position

Assets	2020	2019
	R'000	R'000
Current Assets
Inventory	119	109
Debtors (refer to note1)	401	347
Short term investments	4	19
Cash	48	48
	572	523
EQUITY AND LIABILITIES
Noncurrent liabilities	49	35
Taxes	62	47
Dividend	19	14
Creditors (refer to note 2)	371	324
	501	420
Net current assets	71	103
Notes
1. Ammount of trades receivable in debtors amount	330	285
2.Amount of trades payables in creditors amount	226	211

3.1 Calculate liquidity and working capital ratios. (posted separate)

3.2 Comment on the calculated ratios. ( on liquidity ratios plus on working capital ratios)

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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