Make suggestions as to how Denine can improve the profitability and cash flows of Kathole Retail (identify those statement of comprehensive income and statement of financial position items as well as ratios that are out of line). (10)

Kathole Retail STATEMENT OF FINANCIAL POSITION: ASSETS: 28 FEB 2021 28 FEB 2022 RAND % RAND % FIXED ASSETS 950 000 23,81% 1 185 000 18,54% Furniture & Fittings 150 000 3,76% 145 000 2,27% Equipment/Computers 360 000 9,02% 440 000 6,88% Vehicles 440 000 11,03% 600 000 9,39% CURRENT ASSETS 3 040 000 76,19% 5 208 000 81,46% Inventory 1 600 000 40,10% 2 756 000 43,11% Debtors 1 400 000 35,09% 2412 000 37,73% Cash and Bank 40 000 1,00% 40 000 0,63% TOTAL: ASSETS 3 990 000 100,00% 6 393 000 100,00% CAPITAL: EQUITY CAPITAL Owners' Contribution Retained Earnings MEDIUM TERM LOANS CURRENT LIABILITIES Trade Creditors Bank Overdraft Other TOTAL: CAPITAL RAND % 1 800 000 45,11% 658 000 16,49% 1 142 000 28,62% 200 000 5,01% 1 990 000 49,87% 1 640 000 41,10% 252 000 6,32% 98 000 2,46% 3 990 000 100,00% RAND % 1 653 677 25,87% 658 000 10,29% 995 677 15,57% 180 000 2,82% 4 559 323 71,32% 2 167 000 33,90% 2 294 323 35,89% 98 000 1,53% 6 393 000 100,00% Kathole Retail STATEMENT OF COMPREHENSIVE INCOME: 28 FEB 2021 28 FEB 2022 RAND % RAND % SALES 21 000 000 100,00% 29 000 000 100,00% LESS: COST OF SALES 15 750 000 75,00% 22 330 000 77,00% GROSS PROFITI 5 250 000 25,00% 6 670 000 23,00% PLUS: OTHER INCOME 210 000 1,00% 290 000 1,00% TOTAL GROSS PROFIT 5 460 000 26,00% 6 960 000 24,00% 4 557 250 21,70% 6 921 600 23,87% 13.130.000 - 34,90% 4825 000 . .18.64% OPERATING EXPENSES: Personnel Costs: Management Salaries Salaries and wages Expenses - to third parties Royalties (2%) Franchise Fee Water and Electricity Rent Bank Charges Insurance Accounting Fees RSC Other Expenses: Advertising Bad Debts Computer Expenses Entertainment Motor Vehicle Expenses -Printing and Stationary Postage Telephone & Fax - Travel & Accommodation Miscellaneous Depreciation OPERATING PROFIT Less: Interest Paid NET PROFIT BEFORE TAX Less: Tax (30%) NET PROFIT AFTER TAX 680 000 3,24% 1 150 000 3,97% 2 450 000 11,67% 3 675 000 12,67% DO 511 4503 2.44% 651150-12,25% 210 000 1,00% 290 000 1,00% 0,00% 0,00% 18 000 0,09% 32 000 0,11% 180 000 0,86% 198 000 0,68% 6 000 0,03% 8 000 0,03% 36 000 0,17% 42 000 0,14% 19 450 0,09% 23 150 0,08% 42 000 0,20% 58 000 0,20% 915 8004,36% -7.445 450 4,98% 88 000 0,42% 162 000 0,56% 155 000 0,74% 372 000 1,28% 55 000 0,26% 75 000 0,26% 35 000 0,17% 62 000 0,21% 143 200 0,68% 218 000 0,75% 32 600 0,16% 36 450 0,13% 75 000 0,36% 86 000 0,30% 45 000 0,21% 56 000 0,19% 76 000 0,36% 112 000 0,39% 21 000 0,10% 29 000 0,10% 190 000 0,90% 237 000 0,82% 902 750 4,30% 38 400 0,13% 45 200 0,22% 247 432 0,85% 857 550 4,08% -209 032 -0,72% 257 265 1,23% -62 710 -0,22% 600 285 2,86% -146 323 -0,50% RATIO ANALYSIS COMPUTATION 2020/21 Gross Profit 1 / Sales Total Gross Profit / Sales Operating Profit / Sales 25,00% 26,00% 4,30% Operating Expenses / Sales Personnel Expenses / Sales Third Party Expenses / Sales Other Costs / Sales Interest Paid / Sales Net Profit Before Tax / Sales Net Profit After Tax / Sales 21,70% 14,90% 2,44% 4,36% 0,22% 4,08% 2,86% PROFITABILITY: Gross Profit Margin Total Gross Profit Margin Operating Profit Margin Expense Analysis: - Operating Expenses Personnel Expenses - Third Party Expenses Other Expenses Interest Expenses Net Profit Before Tax Net Profit After Tax ACTIVITY: Total Asset Turnover Fixed Asset Turnover Current Asset Turnover Inventory Days Debtors' Days (60%) Creditors' Days LIQUIDITY: Current Ratio Acid Test Ratio SOLVENCY: Interest Cover Debt Ratio RETURN ON ASSETS RO A Before Interest (2 X 6) ROA After Interest (5a X 6) RETURN ON EQUITY RO E Before Tax RO E After Tax Sales / Total Assets Sales / Fixed Assets Sales / Current Assets Inventory * 365 / Cost of Sales Debtors * 365 / Sales Creditors *365 / Cost of Sales 5,3 22,1 6,9 37,1 40,6 38,0 Current Assets / Current Liabilities CA - Inventories / Current Liabilities 1,53 0,72 Operating Profit / Interest Total Debt / Total Assets 20,0 54,9% Operating Profit/Total Assets NPBT/ Total Assets 22,63% 21,49% INPBT/Total Equity INPAT/Total Equity 47,64% 33,35%