Lavender Ltd

Lavender Ltd is an organization which is at its mid-growth stage, operating in retail sector. Early last year, its operations were disrupted negatively by the COVID-19 pandemic. The companys management was very concerned about the future of the organization, and they have chosen you, as the marketing manager, with some idea of finance, to analyse the performance of the organization using the information below:

Statement of Comprehensive Income for the year ended 30 September 2020.

	R000
Sales	850
Cost of sales	(350)
Gross profit	500
Operating expenses	(280)
Operating profit	220
Interest	(20)
Profit before tax	200
Tax @ 30%	(60)
Net profit for the year	140

Lavender Ltd

Statement of Financial Position as at 30 September 2020

	R000
Assets
Non-current assets
Property, plant, and equipment	1 200
Current assets	121
Inventory	60
Trade receivables	28
Cash and cash equivalents	33
Total assets	1 321
Equity and liabilities
Capital and reserves
Issued capital	1 000
Retained Earnings	100
Non-current liabilities
Interest bearing borrowings:
Long-term	186
Current liabilities
Trade payables	35
Total Equity and Liabilities	1 321

Additional information:

All sales are on credit.

All purchases are on credit.

Value of purchases is R362 000.

Inventory Turnover is based on cost of sales.

Inventory Turnover period for the previous financial period was 20 days.

Accounts Receivable period for the previous financial period was 30 days.

Accounts Payable period for the previous financial period was 25 days.

Source: Hunde, T. (2022)

Required

Analyse the asset management ratios of the company for the year ending 30 September 2020.

(20 Marks)

Note

Your analysis should include:

Comment on your findings by explaining the meaning of the specific category of ratios and defining the ratios.

Comment on the known industry ratios and the previous years ratios in relation with your findings.

Calculations

Round your answers to two decimal places.