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PART B Analysis & Interpretation & Internal control (30 Marks; 36 minutes) One of the most important features in the accounting domain that makes
PART B Analysis & Interpretation & Internal control (30 Marks; 36 minutes) One of the most important features in the accounting domain that makes a business to be effective or become a failure, is the way in which financial statements are analysed and interpreted by the owners (partners) in order to make sound financial decisions. Myiko and Mnqobi are partners in a business, trading as MM Traders selling T-Shirts for young boys and girls. MM Traders approached you to assist and advice with the analysis and interpretation of the financial statements on 28 February 2022. REQUIRED Briefly explain and/or calculate the following requested by the two partners in order for them to understand the financial statements: 1 What does liquidity mean? 2 Explain the difference between current ratio and the acid test ratio. 3 Identify THREE other liquidity ratios which they may look at to address their (1) (4) (6) cash problems. Do not mention the ratios mentioned in 2. The partners want you to calculate the debt/ equity ratio for 2022. on your findings. Comment (4) 5 Calculate the acid test ratio of the business on 28 February 2022. Comment (5) on you findings. 6 Calculate the stock turnover rate. (5) 7 The business aimed at the mark-up of 70% on cost. Identify the indicator that (1) they will use to check whether they reached their goal. NS Traders could not achieve a mark-up of 70%. Provide TWO possible (4) reasons why they could not achieve the mark-up percentage.
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