INFORMATION Silverline Ltd's Statement of Comprehensive Income for the year ended 31 December 2019 and Statement of Financial Position as at 31 December 2018 and 2019 are as follows: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 R Sales (all credit) 1 152 000 Cost of sales (614 000) Gross profit 538 000 Other operating income 42 000 Gross operating income 580 000 Distribution expenses (130 000) Administrative expenses (52 000) Operating profit 398 000 Interest income 34 000 Interest expense (46 000) Profit before tax 386 000 Income tax (92000) Profit after tax 294 000 2018 R STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: 2019 R ASSETS Non-current assets 1 132 000 Property, plant and equipment: 1 132 000 Current assets 360 000 Inventories 82 000 Trade and other receivables (All accounts receivable) 200 000 Cash and cash equivalents 78 000 Total assets 1 492 000 1 100 000 1 100 000 330 000 88 000 212 000 30 000 1430 000 2019 R 2018 R EQUITY AND LIABILITIES Equity Ordinary share capital Retained earnings Non-current liabilities Long-term borrowings Current liabilities Trade and other payables SARS: Income tax Total equity and liabilities 726 000 480 000 246 000 500 000 500 000 266 000 220 000 46 000 1 492 000 352 000 300 000 52 000 800 000 800 000 278 000 246 000 32 000 1 430 000 Additional information 1. Additional plant and machinery were purchased during 2019. There were no other non-current asset acquisitions or disposals. Depreciation for 2019 amounted to R158 000. 2. An interim dividend of R100 000 was paid on ordinary shares during 2019. No final dividends were declared. REQUIRED 3.1 Use the information provided in Question 2 to calculate the following ratios for 2019. (Where applicable, round off answers to two decimal places.) 3.1.1 Net profit margin (2 marks) 3.1.2 Average collection period (2 marks) 3.1.3 Inventory turnover (2 marks) 3.1.4 Financial leverage (2 marks 3.1.5 Acid-test ratio (2 marks 3.1.6 Debt to asset ratio (2 marks) 3.1.7 Return on equity (2 marks 3.2 Comment on the return on equity calculated above. (Note: The retum on equity for 2018 was 18%.) (4 marks) 3.3 Refer to the appropriate ratio in question 3.1 and explain whether the company will be able to pay its short-term debts when business conditions are not (2 marks) favourable. REQUIRED Use the information provided below to complete the Cash Flow Statement of Silverline Ltd for the year ended 31 December 2019. Use the following format as a guide. (Commence with the R556 000 for the profit before working capital changes.) CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2019 R 556 000 Cash flows from operating activities Profit before working capital changes Working capital changes Increase/decrease in inventory Increase/decrease in receivables Increase/decrease in payables Cash generated from operations Interest paid Interest income Dividends paid Income tax paid Net cash inflow from operating activities Cash flow from investing activities Non-current assets purchased Net cash flow from investing activities Cash flow from financing activities Proceeds from issue of ordinary shares Long-term borrowings increase/decrease Net increase/decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year