QUESTION 2 The following is a summary of the Financial Statements of Baba Company dealing in plastic products in Ghana. Statement of Profit or Loss Accounts for the years ended 2017 2018 GH GHe Sales revenue 200,000 280,000 Cost of sales (150.000) (210.000) 2 Gross profil Distribution cost Administrative expenses Operating profit Interest on loan Net Profit Rego 50,000 70,000 (15,000) (18,000) (23,000) (28.000 12,000 24.000 (4.000) (4.000) 8.000 20.000 Statement of financial position as at 31" December: 2017 2018 GHE GHO GH GH Non-current Assets 110,000 140,000 Current Assets: Inventory 20,000 30,000 Trade Receivables 25,000 28,000 Bank 0 45,000 5,000 63,000 Less Current Liabilities: Trade payables 15,000 12,000 Bank overdraft 10.000 25.000 0 12,000 130.000 191.000 Financed by: Ordinary Share capital 50,000 100,000 Profit or Loss Account 30,000 41,000 8% Loan Notes 50,000 50.000 130,000 191.000 Required: a) Calculate the following ratios for of Baba Enterprise (assumed that all sales and purchases are made on credit). i) Gross profit margin ii) Net profit margin (2 marks) Current ratio (2 marks) iv) Acid Test/Quick ratio (2 marks) (2 marks) b) Using the informational above, interpret the results of the ratios under two broad categories of liquidity. ( (Total: 12 marks)