QUESTION $2(20$ Marks$)$

REQUIRED

Use the information provided below to answer the following questions.

Note: Use formulas provided in the formula sheet only $($that appear after QUESTION $5).$ Answers to the ratios

must be expressed to two decimal places.

$2\mathrm{.}1$ Calculate the percentage profit on sales after the cost of sales only have been accounted for. $(2$ marks$)$

$2\mathrm{.}2$ Has the liquidity of the company improved? Use two relevant ratios to motivate your answer. $(6$ marks$)$

$2\mathrm{.}3$ Use the relevant ratios to comment on the effectiveness with which the company has employed the inventory

and debtors during $2022.(6$ marks$)$

$2\mathrm{.}4$ Use TWO $(2)$ appropriate ratios that shareholders would use to assess the profitability of the company for

$2022$ by examining the after$-$tax returns earned. Comment on your calculations. $(6$ marks$)$

INFORMATION

Extracts of the financial statements of Ultra Limited are presented below:

ULTRA LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED $31$ DECEMBER $2022$

R

Sales $(90\%$ on credit$)8800000$

Cost of sales $4000000$

Operating profit $2400000$

Profit after tax $1400000$

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER:

$2022($R$)2021($R$)$

Non$-$current assets $68000005600000$

Inventory $380000300000$

Trade and other receivables $($Accounts receivable only$)520000460000$

Cash and cash equivalents $320000400000$

Shareholders$$ equity $50000003800000$

Non$-$current liabilities $24000001900000$

Current liabilities $6200001060000$

Additional information

$$ The authorised share capital of the company consists of $1500000$ ordinary shares of which $1000000$ have

been issued.