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QUESTION 2 FINANCE (30 MARKS INFORMATION Puff Adder Distributors Income Statements for the year ended 31 December 2019 and 2018 2019 2018 Sales (all credit) 2167500 1719040 Cost of sales (all credit) (1351539) (1181761) Gross profit 815961 537279 Operating expenses: (206031) (167969) Selling, general and administrative (120649) (107467) Other expenses (85382) (60502) Operating profit 609930 369310 Other income: 11458 9637 Interest income 11458 9637 Profit before interest 621388 378947 Interest expense (61372) (72515) Profit before tax 560016 306432 Tax (244422) (182707) Net profit after tax 315594 123725 Puff Adder Distributors Balance Sheets the year ended 31 December 2019 and 2018 2019 2018 Assets Non-current assets Current assets 269400 160380 206436 212416 81411 40247 Inventories Accounts receivable Cash and cash equivalents 93126 39514 28740 429780 90756 Total assets 418852 Owners' equity and liabilities Owners' equity Non-current liabilities Current liabilities Accounts payable Other current liabilities Total owners' equity and liabilities 225824 62493 141463 55483 8598 429780 212244 87067 119541 56291 63250 418352 2.1 Use the information provided above to calculate the following ratios and interpret them over the two-year period (2018-2019) taking into consideration the additional information provided on each ratio. Show your workings and where applicable, round off answers to two decimal places. 2.1.1 Profit margin (4 marks) 2.12 Acid test ratio (4 marks) 2.1.3 Inventory turnover [inventory for 2017: 69 870) (4 marks) 2.1.4 Debtors collection period (Current credit terms to debtors are 30 days) (4 marks) 2.1.5 Return on assets (Current rate on fixed deposits at banks. 7.25%, Current rate at banks for business loans 11%, the current inflation rate 5.6%) (4 marks) 2.2 Use the following information to calculate the economic order quantity: (5 marks) Puff Adder Distributors purchases 750 snake repellers at R340 each per annum. The snake repellers are sold at R480 each at a steady rate during the year. The cost of placing a single order amounts to R20. Inventory holding cost amounts to R2.50 per unit. 2.3 Use the following information to calculate the cost of not accepting a discount: (5 marks) Reptile Wholesaler's normal credit terms to Puff Adder Distributors are 30 days but is prepared to allow a 4.5% rebate i Pulf Adder Distributors pays the account within 15 days. Calculate the cost to Puff Adder Distributors of not accepting the discount