2.2 Required

use the information provided below to answer the following questions:

3.2.1 Calculate the following ratios for 2020. where applicable, express answers to two decimal places.

* Gross profit margin

* Operating profit margin

* Inventory turnover period

* Trade receivables period

* Trade payables period

* Return on capital employed

3.2.2 Comment on the liquidity position of the project for 2020 by calculating two appropriate ratios.

3.2.3 Suggest 2 ways in which the trade receivables period maybe improved.

Information

The extract of the financial statements for a project of Zengu Limited for 2020 and 2019 are provided below.

Extract

extract of income statement for the year ended 31 December 2020	R
Sales	1920 000
Cost of sales	1200 000
Operating profit	432 000
Profit before tax	384 000
Profit after tax	268 800

Extract of statement of financial position as at 3 December:

	2020	2019
	R	R
Non current assets	2580 000	1920 000
Inventories	532 000	480 000
Accounts receivable	300 000	504 000
Cash	440 000	336 000
	3852 000	3240 000
Equity	2964 000	2640 000
Non current liabilities	580 000	340 000
Current liabilities (accounts payable only)	308 000	260 000
	3852 000	3240 000

Note: Total purchases amounted to R1252 000. All purchases are on credit.

Ninety percent (90%) of all sales are on credit.

25 marks