EMPIRESHIRE LIMITED

STATEMENTS OF PROFIT OR LOSS FOR THE YEAR ENDED $31$ DECEMBER $2023$

$20232022$

R$000$ R$000$

Revenue $72000100000$

Cost of sale $(48000)(60000)$

Gross profit $2400040000$

Profit from sale of division $($see note $($ii$))2000-$

Distribution costs $(7000)(10600)$

Administrative expenses $(9600)(5800)$

Operating profit $940023600$

Finance costs $(800)(1600)$

Proft before taxation $860022000$

Income tax expense $(2600)(6600)$

Profit for the year $600015400$

EMPIRESHIRE LIMITED

STATEMENTS OF FINANCIAL POSITION AS AT $31$ DECEMBER $2023$

$20232022$

R$000$ R$000$

Assets

Non$-$current assets

Property, plant, and equipment $3260038000$

Intangible $-$ goodwill $-4000$

$3260042000$

Current assets

Inventory $680011600$

Trade receivable $26004800$

Bank $3000-$

$1240016400$

Total assets $4500058400$

Equity and Liabilities

Equity

Equity shares of R$1$ each $2000020000$

Retained earnings $60008000$

$2600028000$

Non$-$current liabilities

$10\%$ loan $800016000$

Current liabilities

Bank overdraft $-2800$

Trade payables $86006200$

Current tax payable $24005400$

$1100014400$

Total equity and liabilities $4500058400$

Notes

$($i$)$ The following selected ratios for Empireshire have been calculated for the year ended $31$ December $2022($as

reported above$)$:

Ratios:

Gross profit margin $40\mathrm{.}0\%$

Operating profit margin $23\mathrm{.}6\%$

Return on capital employed:

$[$profit before interest and taxes$/($total assets $$ current liabilities$)]$

$53\mathrm{.}6\%$

Net asset turnover $2\mathrm{.}27$ times

$($ii$)$ On $1$ January $2023,$ Empireshire sold the net assets $($including goodwill$)$ of a separately operated division of its

business for R$16$m cash on which it made a profit of R$2$ m$.$ This transaction required shareholder approval and, in

order to secure this, the management of Empireshire offered shareholders a dividend of $80$ cents for each share in

issue out of proceeds of the sale. The trading results of the division which are included in the statement of profit or loss

for the year ended $31$ December $2022$ above are:

R

Revenue $36000000$

Cost of sales $(20000000)$

Gross profit $16000000$

Distribution costs $(2000000)$

Administrative expenses $(2400000)$

Profit before interest and tax $11600000$

Required:

$2\mathrm{.}1.$ Calculate the equivalent ratios for Empireshire for the year ended $31$ December $2022,$ after excluding the contribution

made by the division that has been sold. $(4)$

$2\mathrm{.}2.$ Calculate the equivalent ratio for Empireshire for the year ended $31$ December $2023,$ excluding the profit on the sale

the division. $(4)$

$2\mathrm{.}3.$ Based on the outcomes of the ratio analyses undertaken in questions $2\mathrm{.}1$ and $2\mathrm{.}2,$ as well as the $2022$ ratios provided

in the question, comment on the comparative financial performance and position of Empireshire. $(10)$