Question 2 The following information of Prancer Limited is given below: Prancer Limited Income Statements for the years ended: 2021 $000 Sales 1,000 Cost of goods sold (400) Gross profit 600 Less: Operating expenses (430) Net Income 170 2020 $000 800 (300) 500 (350) 150 Prancer Limited Statements of Financial Position Assets 2021 $000 750 60 Plant and Equipment (at net book value) Closing Inventory Trade receivables Cash Total assets 2020 $000 600 35 20 12 667 40 20 870 520 320 840 500 150 650 Equity Share Capital Retained earnings Total equity Liabilities: Trade payables Accruals Tax payable Total liabilities Total liabilities and equity 20 8 2 30 870 11 5 1 17 667 a. Required: Calculate the following ratios for each of the 2 years: i. Current Ratio. [4 marks] ii. Acid-Test Ratio. [4 marks) ii. Gross Profit Margin. [4 marks] iv. Net Profit Margin. [4 marks] b. From the results of the results of the ratios computed, comment on the overall profitability of the above business over the last 2 years. (4 marks) Appendix D X 100 Current Assets :1 Current Liabilities Gross Profit Sales or Revenue or Turnover Operating Profit Sales or Revenue or Turnover X 100 Trade Payables x 365 days Credit Purchases or (Cost of Goods Sold) or (Cost of Sales) Closing Inventory _x 365 days Cost of Goods Sold or (Cost of Sales) Cost of Goods Sold or (Cost of Sales) Closing Inventory Current Assets - Closing Inventory - Prepayment :1 Current Liabilities X 100 Net Profit before tax Sales or Revenue or Tumover Trade Receivables x 365 days Credit Sales X 100 Net Profit after tax Sales or Revenue or Turnover