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Transcription of this question: 2.Khalil Damascus Supplies (KDS)Khalil Damascus Supplies (KDS) sells construction materials, such as cement and bricks, to thebusiness-to-business (B2B) market. It is located in an industrial area in Damascus. Its manager isAhmed Khalil.Large construction companies have their own cranes. However, small construction companies Oftendo not. Many small construction companies have asked KDS if it could Offer a crane rental (hire)service.(Source: http•J.’en_wikipediaorg.’WIki/FiIe:Truck-mounted_crane_building_a_bridge_jpg]Ahmed calculated that purchasing two cranes, costing Sl 00000 each, would be a worthwhileinvestment. Rental income from the cranes would enable KDS to break-even on the equipment.Ahmed believed that future profits would come from an increase in the sales Of construction materialto new customers attracted to KDS because Of its crane rental service.Selected financial information before KDS purchases the cranes, as at 31 May 2012 (all figures in S):CashCost of goods soldCreditorsDebtorsEx ensesFixed assets (building and equipment)Loan capitalRetained rofitSales revenueShare capitalShort-term borrowingStock55000300000045000x23000003500004000021500056000002000001000050000(This question continues on the following page)Ahmed must decide who will operate the cranes. There are three options:• First, train some current employees at KIDS. Several have said that they are interested.• Second, increase the number Of employees by hiring two experienced and licensed crane operators.• Third, rent only to customers who themselves employ licensed crane operators. However, manysmall construction companies do not employ licensed crane operators.Ahmed likes the idea Of training his own employees, as it would give them additional job skills,job enrichment and more experience with construction sites. However, he is concerned about thecosts Of training and additional insurance.(a)(b)(d)(e)Describe one appropriate source Of finance other than a bank loan that KDScould use for the purchase of the cranes.Define the term retained profit.(i)(ii)Using relevant information from the table, construct a balance sheet forKDS as at 31 May 2012 (before the purchase Of the cranes) and calculatedebtors (figure X).Using relevant information from the table, calculate the gearing ratio andthe gross profit for KDS before the purchase Of the cranes (show all yourworking).Comment on the financial impact on KDS if Ahmed uses a bank loan to fund thepurchase Of the cranes.Contrast the three options of who will operate the cranes.[2 marks][2 marks][5 marks][4 marks][2 marks][5 marks]

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