Harmony Limited Extract of Statement of Comprehensive Income for the year ended 31 December 2020 R Sales 6 600 000 Cost of sales (3 900 000) Gross profit 2700 000 Operating expenses (1 710 000) Selling and administrative expenses 1 260 000 Depreciation 450 000 Operating profit 990 000 Interest expense (270 000) Profit before tax 720 000 Company tax (240 000) Profit after fax 480 000 Extract of Statement of Changes in Equity for the year ended 31 December 2020 Retained earnings 1 500 000 Balance on 01 January 2020 480 000 Profit after lax (180 000) Dividends paid and proposed in 2020 1 800 000 Balance on 31 December 2020 Balances extracted from the Statement of Financial Position as at 31 December: 2020 2019 R R Plant and equipment 3 750 000 3 000 000 Investments 210 000 240 000 Inventories 1 290 000 1 230 000 Accounts receivable 1 140 000 1 050 000 Cash and cash equivalents 300 000 210 000 1 860 000 Ordinary share capital 1 860 000 Retained earnings 1 800 000 1 500 000 360 000 210 000 Long-term loan Accounts payable 2 520 000 1962 000 120 000 150 000 Dividends payable 30 000 48.000 Income tax payable Note: (a) Plant and equipment was purchased but there was no disposal (6) The number of ordinary shares in issue was 930 000 (C) All purchases and sales of inventory were on credit. (d) Credit terms to debtors are 30 days. Debtors took approximately 28 days to settle their accounts during 2019 QUESTION 4 Use the information provided in QUESTION 3 to answer the following questions: Calculate the following ratios for 2021. Express answers to two decimal places. 4.1 4.1.1 Gross margin (2 marks) 4.1.2. Inventory tumover (2 marks) 4.1.3 Acid test ratio (2 marks) 4.1.4 Debt to equity (2 marks) 4.1.5 Earnings per share (2 marks) 4.2 (4 marks) 4.3 (3 marks) Are the collections from credit sales satisfactory? Motivate your answer by using the relevant ratio Would the shareholders of Harmony Limited be satisfied with the return on their investments? Motivate your answer with the use of a relevant ratio, Suggest THREE (3) ways in which Harmony Limited can improve its gross margin ratio, without increasing the seling price of the inventories 4.4 [3 marks) dol QUESTION 3 Use the information provided below to prepare the Cash Flow Statement of Harmony Limited for the year ended 31 December 2020. (20 Marks) Harmony Limited Extract of Statement of Comprehensive Income for the year ended 31 December 2020 R Sales 6 600 000 Cost of sales (3 900 000) Gross profit 2700 000 Operating expenses (1 710 000) Selling and administrative expenses 1 260 000 Depreciation 450 000 Operating profit 990 000 Interest expense (270 000) Profit before tax 720 000 Company tax (240 000) Profit after fax 480 000 Extract of Statement of Changes in Equity for the year ended 31 December 2020 Retained earnings 1 500 000 Balance on 01 January 2020 480 000 Profit after lax (180 000) Dividends paid and proposed in 2020 1 800 000 Balance on 31 December 2020 Balances extracted from the Statement of Financial Position as at 31 December: 2020 2019 R R Plant and equipment 3 750 000 3 000 000 Investments 210 000 240 000 Inventories 1 290 000 1 230 000 Accounts receivable 1 140 000 1 050 000 Cash and cash equivalents 300 000 210 000 1 860 000 Ordinary share capital 1 860 000 Retained earnings 1 800 000 1 500 000 360 000 210 000 Long-term loan Accounts payable 2 520 000 1962 000 120 000 150 000 Dividends payable 30 000 48.000 Income tax payable Note: (a) Plant and equipment was purchased but there was no disposal (6) The number of ordinary shares in issue was 930 000 (C) All purchases and sales of inventory were on credit. (d) Credit terms to debtors are 30 days. Debtors took approximately 28 days to settle their accounts during 2019 QUESTION 4 Use the information provided in QUESTION 3 to answer the following questions: Calculate the following ratios for 2021. Express answers to two decimal places. 4.1 4.1.1 Gross margin (2 marks) 4.1.2. Inventory tumover (2 marks) 4.1.3 Acid test ratio (2 marks) 4.1.4 Debt to equity (2 marks) 4.1.5 Earnings per share (2 marks) 4.2 (4 marks) 4.3 (3 marks) Are the collections from credit sales satisfactory? Motivate your answer by using the relevant ratio Would the shareholders of Harmony Limited be satisfied with the return on their investments? Motivate your answer with the use of a relevant ratio, Suggest THREE (3) ways in which Harmony Limited can improve its gross margin ratio, without increasing the seling price of the inventories 4.4 [3 marks) dol QUESTION 3 Use the information provided below to prepare the Cash Flow Statement of Harmony Limited for the year ended 31 December 2020. (20 Marks)