QUESTION 2

(25 Marks)

The extracts of the financial statements of Spire Limited for 2014 and 2013 are provided below.

INFORMATION

Spire Limited Statement of Comprehensive Income for the year ended 31 December:

20.14 Sales (all credit)

1 672 400 Cost of sales (all credit)

(878 700) Gross profit

793 700

Operating expenses:

(487 900) Selling, general and administrative

396 300

Other expenses

91 600

20.13 1 574 800 (812 600)

762 200 (466 600) 371 200 95 400

Operating profit Other income:

305 800

2700

295 600

3300

Interest income

3 300

2700

308 500 (11 100)

Profit before interest Interest expense

Profit before tax Company tax

Profit after tax

298 900 (10 900) 288 000 (72 000)

297 400 (74 350)

223 050

216 000

Spire Limited Statement of Financial Position as at 31 December:

Assets Non-current assets

20.14

814 300 637 900

20.13 783 000

606 600

Current assets:

Inventories

Accounts receivable Cash and cash equivalents

231 200 289 100 117 600

203 000 277 800

125 800 1 389 600

Total assets

1 452 200

653 100

628 900

Equity and liabilities Equity Ordinary share capital (600 000 shares) Retained earnings Non-current liabilities Current liabilities

600 000

53 100 323 700 475 400

600 000

28 900 378 800 381 900

100 800

Accounts payable

Other current liabilities Total Equity and liabilities

108 100 367 300

281 100

1 452 200

1389 600 to

REQUIRED

Calculate the following ratios for 20.14. Where applicable, round off answers to two decimal places.

2.1 Gross Profit Margin

(5 marks)

2.2 return on assets

(5 marks)

2.3 Current ratio

(5 marks)

2.4 Acid test ratio

(5 marks)

2.5 Given that the industry average for Acid test is 1.4:1, comment on Zambezi's Gross profit margin?

(5 marks)