QUESTION 2 (20 MARKS) REQUIRED

2.1 Calculate the ratios that reflect the following for 2022 only. Express the answers to two decimal places.

2.1.1 The percentage of profit on sales that the company produced from its operations prior to considering operating expenses, other income, interest and taxes. (2 marks)

2.1.2 The amount of money each share would receive if all the profits are distributed to the outstanding shares at the end of the financial year. (2 marks)

2.1.3 A measure of the companys ability to pay its short-term obligations within one year using only its most liquid current assets. (2 marks)

2.1.4 The profitability ratio which measures how efficiently the company can generate profits from its capital employed. (2 marks)

2.1.5 A measure of the proportion of the profit after tax that is kept back in the company as retained earnings. (2 marks) 2.2 Comment on the following ratios that have been calculated for 2022 and 2021:

Ratio 2022 2021 Current ratio 3.86:1 3.67:1

Debtors collection period 27.87 days 35.78 days

Return on equity 9.07% 14.67%

Return on assets 11.13% 18.87%

Debt to assets 23.03% 18.49% (10 marks)

INFORMATION Extracts of the financial statements of Amber Limited for 2022 and 2021 are given below. AMBER LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 R Sales 3 000 000 Cost of sales 1 874 000 Operating profit 670 000 Profit before tax 600 000 Profit after tax 420 000 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: Assets 2022 (R) 2021 (R) Non-current assets 3 562 000 3 000 000 Current assets 2 456 000 2 062 000 Total assets 6 018 000 5 062 000 Equity and Liabilities Shareholders equity 4 632 000 4 126 000 Non-current liabilities (Loan: 15% p.a.) 750 000 374 000 Current liabilities 636 000 562 000 Total equity and liabilities 6 018 000 5 062 000 Additional information:

Current assets as at 31 December 2022 include inventories of R1 200 000.

Total dividends for 2022 amounted to R336 000.

The authorised share capital consists of 1 000 000 ordinary shares of which 600 000 have been issued to date.