QUESTION 2: ANALYSIS OF FINANCIAL STATEMENTS OF A PARTNERSHIP (30 marks; 20 minutes) REQUIRED The following information related to the financial records of WOODWORKS TRADERS with partners A. Wood and C. Works. The financial year ends on 31 March 2021 and the partnership uses a perpetual stock system. 2.1. Calculate the following financial indicators on 31 March 2021: 2.1.1. Acid-test ratio (4) 2.1.2. Debt-equity ratio (3) 2.1.3. Return earned by A. Wood (6) 2.2. Quote figures/percentages, financial indicators, or calculations in EACH case below to support your comments and explanations. 2.2.1 Comment on the liquidity of the business. Should the partners be concerned about the ability of the business to pay the short-term debts. (6) 2.2.2 The partners decided to increase the loan during the financial year. Comment on this decision with reference to the degree of financial risk. Quote TWO financial indicator. 2.2.3 Comment on A. Wood's return on his investment in the partnership. Should he be happy with the retum he has received on his investment. Provide a reason for your answer. INFORMATION: (6) (5) 2021 March 31 A. Interest on capital: A Wood Interest on capital: C. Works Salary: A. Wood Appropriation Account 2021 47 250 March 31 Profit and loss 31 500 168 750 Salary: C. Works 205 200 Bonus to C. Works 17 100 Current account: A. Wood 16 200 Current account: C Works 16 200 B. Balances at the end of March 2021. Owners' equity Capital: A. Wood 2021 1 425 800 750 000 2020 1 385 900 650 000 Capital: C. Works 675 000 700 000 Current account: A. Wood Current account: C. Works Dr 15 500 10 750 16 300 25 150 Current assets 294 650 530 250 Trade-and other receivables 159 750 307 350 Cash-and cash equivalents 41 150 32 650 Inventories 93 750 190 250 Non-current liabilities: Loan 450 000 250 000 Current liabilities 190 500 219 000 C. Financial Indicators on 31 March 2021. 2021 2020 Current ratio Acid test ratio Debt equity ratio 1,5:1 2,4 1 ? 1,6 1 ? 0,2 1 Return earned by A. Wood ? 36% Return earned by C. Works 38% 39% Return on partner's equity 36% 38% Return on total capital employed 25% 22% Interest rate on alternative investments 8% 8% Interest rate on loans/borrowed capital 15% 15% 502 2001