Meropa $($Pty$)$ Ltd $($Meropa$)$ is a company that manufactures sim cards that are sold by the

big telecommunications companies. The company has recently appointed a new Finance

Director who after, reviewing the $30$ June $2023$ annual financial statements $($AFS$)$ has raised

some concerns about the liquidity position of the company. Mr Finance Director has requested

that you, the management accountant of Meropa, to review the liquidity position of the

company and to prepare a memorandum that can be presented to the next board meeting.

You have extracted the following information from the AFS as at $30$ June $2023.$

Statement of Financial Position as $30$ June $2023$

$20232022$

R$000$ R$000$

Non$-$Current Assets $5175040250$

Current assets $8970082800$

Inventory $4140036800$

Trade and other receivables $4715027600$

Cash and Cash equivalents $115018400$

Total Assets $141450123050$

Equity and Liabilities

Total Equity $6900065550$

Ordinary Shares $1150011500$

Reserves $5750054050$

Non $-$ current liabilities $4370043700$

$10\%$ Long$-$term loan $1495014950$

$8\%$ Long$-$term loan $2875028750$

Current liabilities $2880013900$

Trade and other payables $1955012650$

Bank overdraft $92001150$

Total and equity liabilities $141450123050$

ASSIGNMENT $2$ SEMESTER

Page $10$ of $10$

QUESTION $4($continued$)$

Statement of Comprehensive Income for the year ended $30$ June $2023$

$20232022$

R$000$ R$000$

Revenue $184000166800$

Cost of Sales $(138000)(121100)$

Gross Profit $4600045700$

Operating expenses $(34500)(29900)$

Operating profit $1150015800$

Interest expense $(4100)(3800)$

Profit before tax $740012000$

Taxation $(2200)(3600)$

Profit after tax $52008400$

Additional information:

i$.$ The average data for the manufacturing sector on $30$ June $2023$ is as follows:

a$.$ Current ratio $3\mathrm{.}5$

b$.$ Inventory days $100$ days

c$.$ Receivables days $60$ days

d$.$ Payables days $50$ days

 

 

REQUIRED:

$($a$)$ Using appropriate ratios and financial analysis, comment on the

liquidity position of Meropa $($Pty$)$ Ltd for the year ended $30$ June $2023.$