You are the auditor of Syphele Ltd, a company trading in the motor industry. On examining its latest annual financial statements, you make these observations:

• Its gross profit margin, which had consistently been 30% over the past five years, has dropped to 25%.

• Its current ratio, which in the past has always been at the same level as the industry average of 2:1, has now increased to 4:1.

You are required to:

1. List three possible factors that could have caused the reduction of the gross profit margin.

2. List three possible factors that could have caused the increase in the current ratio.