2.1 Compare and comment on the profitability of both companies by using the following ratios:

2.1.1 Return on capital employed (4 marks)

2.1.2 Profit margin (Net profit margin) (4 marks)

2.2 Calculate the earnings retention ratio of both companies and explain how shareholders can benefit from a higher retention ratio. (6 marks)

2.3 Compare the two companies regarding the amount of debt that each company uses to finance its assets (as a percentage). (4 marks)

2.4 Suggest TWO (2) ways in which KLM Limited can improve its gross profit margin ratio, without increasing its selling prices. (2 marks)

Extracts for the year ended 31 December 2022 of the Statement of Comprehensive Income and Statement of Financial Position are given below for two companies viz. KLM Limiled and ZAP Limited. Note: All the income and expenses of both companies are included in the figures above