QUESTION 2 [20 MARKS] You are the managing director of Multiple (Pty) Ltd, a company based in Angola. Multiple is looking to penetrate the Botswana market and decides to do this via acquisition of an already operational company in Botswana. Two companies, Botshelo Ltd and Maikano Ltd are presented to you as the MD. You are more interested in the profitability of the company rather than liquidity. The following are extracts of the financial statements of the two companies for two years. Use them to answer the questions that follow

Botshelo Maikano

Year ended	31 March 2022 Pm	31 March 2021 Pm	31 March 2022 Pm	31 March 2021 Pm
Revenue Cost of Sales	600 (300)	550 (250)	620 (320)	560 (260)
Gross Profit Other Operating expenses	300 (120)	300 (105)	300 (90)	300 (85)
Profit from operations Finance cost	180 (20)	195 (19)	210 (22)	215 (20)
Profit before tax Income tax expenses Net Profit for the period	160 (50) 110	177 (55) 122	188 (78) 110	195 (90) 105

Botshelo Maikano

	31 March 2022 Pm	31 March 2021 Pm	31 March 2022 Pm	31 March 2021 Pm
Non-Current Assets Inventories Trade Receivables Cash	600 60 80 10	570 50 75 20	455 55 90 15	440 50 80 15
Share Capital Reserves	750 150 360	715 150 320	615 110 185	585 110 155
Interest bearing borrowing Current Liabilities	510 150 90	470 150 95	295 240 80	265 240 80
	750	715	615	585

Required:

a. Calculate the following profitability ratios for both years and for each of the two companies:

i. Gross profit margin. (4 marks)

ii. Operating profit margin. (4 marks)

iii. Return on assets. (4 marks)

b. Based on your calculations above, comment on the profitability of the two companies. (8 marks)