4/4 Gibson Limited RZ30 000 All sales and purchases of inventories are on credit. N Required: Compare the performance of Amazon Limited and Gibson Limited (both in same industry) with regard to the following ratios and in each case state your observations: 4.1. 4.2. 4.3 The ability of each company to repay its short term debts without relying on sale of its inventories. (6) The return earned by shareholders on their investment. (6) The operational effectiveness of each company before considering interest income, interest expense and income tax. (6) The effectiveness with which the goods for sale have been managed. (6) An evaluation of each company's performance with regard to the management of its trade creditors. (6) 4.4. 4.5. END OF QUESTION PAPER QUESTION FOUR [30] Extracts of the Statement of Comprehensive Income for the year ended 31 December 2018 and the Statement of Financial Position as at 31 December 2018 are given below for two companies viz. Amazon Limited and Gibson Extract of the Statement of Comprehensive Income for the year ended 31 December 2018: Sales Cost of Sales Gross profit Depreciation Other expenses Operating profit Interest on loan Profit before tax Income tax Profit after tax Amazon Limited R 6 600 000 4 620 000 1 980 000 270 000 240 000 1 470 000 174 000 1 296 000 388 800 907 200 Gibson Limited R 2 160 000 864 000 1 296 000 12 000 45 000 1 239 000 75 000 1 164 000 349 200 814 800 Extract of the Statement of Financial Position as at 31 December 2018: Amazon Limited R Gibson Limited R Assets Non-current assets Inventories Accounts receivable Bank 1 980 000 695 000 1 000 000 0 3 675 000 1 260 000 190 000 180 000 20 000 1 650 000 Equity and Liabilities Ordinary share capital Retained earnings Non-current liabilities (18% p.a) Accounts payable Bank overdraft 2 000 000 250 000 1 020 000 360 000 45 000 3 675 000 1 000 000 80 000 480 000 90 000 0 1 650 000 Additional Information: Inventories as at 31 December 2017 are as follows: Amazon Limited R800 000 Gibson Limited R230 000 All sales and purchases of inventories are on credit