Dhoni is a profitable small business. It operates five shops selling kitchen equipment such as cooking pots and knives. Most of its products go to restaurants and hotels. The company has been offered a takeover price of $700 000 by a large rival. Dhoni’s shareholders have been studying the accounts and are unsure whether the takeover would bring them a benefit. Dhoni’s return on capital employed was 7% in 2015 and 9% in 2016.
(a)[2]
What does the term ‘non-current asset’ mean?
(b)[2]
Calculate the acid test ratio for 2016 using the figures given.
(c)[4]
Identify two reasons why Dhoni has trade receivables, and explain each one.
(d)[6]
Identify two stakeholder groups other than shareholders and explain how they could use Dhoni’s accounts.
(e)[6]
Do you think the takeover would help Dhoni’s shareholders? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Resources owned by the business and used for more than one year” …