Question2 financial statement analysis(20marks)

Success Limited trades in the retail clothing sector and is listed on the general retail sector of the Johannesburg Securities Exchange (JSE). The company focuses on young buyers. Their unaudited results for 31 December 2021are shown below:

Statement of Comprehensive Income for the year ended 31 December 2021

	2021	2020
Turnover	908191 000	814521 000
Cost of Sales	(563078000)	(553874000)
Opening Stock	120000000	189000000
Purchases	657078 000	475874 000
Less: Closing Inventory	(214000000)	(120000000)
Gross Profit	157479 000	135307 000
Operating expenses	(187634000)	(125340000)
Operating profit	157479 000	135307 000
Finance charges	(23547000)	(18712000)
Profit after interest before tax	133932 000	116595 000
Tax
Profit after tax	96432 000	83948 000

Statement of Financial Positionat31 December 2021

	2021	2020
Assets
Non-Current Assets	330187 000	314124 000
Current Assets	462434 000	261033 000
Inventory	214000 000	120000 000
Trade receivables	89669 000	45421 000
Cash balance and investments	158765 000	95612 000
Total Assets	792621 000	575157 000
Equity and Liabilities
Equity	343876 000	294876 000
Ordinary Share Capital	82000 000	82000 000
Accumulated reserves	261876 000	212876 000
Non-Current Liabilities	188386 000	111579 000
Long-term loan	188386 000	111579 000
Current Liabilities	260359 000	168702 000
Trade payables	185269 000	140174 000
Accruals and provisions	75090 000	28528 000
Total Equity and Liabilities	792621 000	575157 000

Financial Ratios of Dressed for Success Limited

		2020	2021
(i)	Gross profit percentage	32%	?
(ii)	Net operating profit percentage	16.6%	?
(iii)	Change in turnover	10.3%	?
(iv)	Return on assets	23.5%	?
(v)	Return on equity	28.5%	?
(vi)	Debtorscollection period	29.1 days	?
(vii)	Inventory turnover	4.6 times	?
(viii)	Debt equity ratio	37.8 :1	?
(ix)	Cash ratio	0.57 :1	?

2 marks each

Additional information:

The company launched a new exclusive clothing brand at the beginning of 2021which is very popular amongst most teenagers.

The annual sales occurred evenly throughout the year. Of the turnover in 2021, 65% was credit sales. This represents a slight decrease from the 70% credit sales in 2020. The financial manager has reviewed the companys credit sales policy and intends to decrease credit sales to 55% of turnover from 2022onwards.

All inventories are purchased on credit. A substantial part of the new clothing brand is imported from China. This inventory is ordered in large quantities to save on shipping costs. The budgeted turnover of the company is R1 089 829 000 for 2022.

There are 365 days in a year and the company tax rate is 28%.

You may ignore the impact of the VAT.

Required

Calculate ratios (i) to (ix) for 2021in the tableabove andprovide possible reasons for the deterioration or improvement thereof from 2020to 2021. Take theadditional information into account for providing these reasons. Round your final answer to the nearestdecimal.Show allworkings.20 marks