Profitability ratios

Makwebo Zed $2023$

Industry

Gross Profit Margin $($GPM$)=($GP$/$S$)*100$

$23\mathrm{.}4\%$

$28\mathrm{.}5\%$

Operating Profit Margin $($OPM$)=($OP$/)*100$

$19\mathrm{.}6\%$

$21\mathrm{.}6\%$

Net Profit Margin $($NPM$)=($NP$/$S$)*100$

$9\mathrm{.}64\%$

$11\mathrm{.}7\%$

Return On Assets $($ROA$)=($NP$/$A$)*100$

$7\mathrm{.}96\%$

$13\mathrm{.}2\%$

Activity Ratios

Asset turnover $=($S$/$A$)$

$0\mathrm{.}826$ times

$1\mathrm{.}119$ times

Inventory turnover$=($COGS$/$Closing Inventory$)$

$3\mathrm{.}877$ times

$3\mathrm{.}536$ times

Average collection period $=($Receivables$/$Sales$)$

$40\mathrm{.}3$ days

$24\mathrm{.}4$ days

Liquidity ratios

Current ratio $=($CA$/$CL$)$

$1\mathrm{.}93$ : $1$

$2\mathrm{.}03$ :$1$

Acid test ratio $=($CA Inv$)/$CL

$0\mathrm{.}969$ : $1$

$0\mathrm{.}851$ :$1$

Leverage or Gearing ratios

Total debt $($All dedt$/$equity$)*100$

$0\mathrm{.}636$

$0\mathrm{.}204$

Ltd to total capitalization $($LTD$/($LTD$+$E$)*100$

$0\mathrm{.}487$

$0\mathrm{.}059$

Interest coverage $=($OP$/$Interest expense$\}$

$4\mathrm{.}533$

$21\mathrm{.}829$

The above ratios are for Makwebo Zed for $2023.$ Based on these ratios, prepare a report to the chairperson of the board of Makwebo Zed. Your report should clearly interpret and evaluate the information given and ncorporate limitations of ratios.