Question 3 (50 Marks) The following information is relates to the activities of Cox Limited. Statement of Comprehensive Income for the year ended 31 December 2019. Credit Sales 4870 Cost of Sales (2830) Gross Profit 2040 Less: Operating Expenses Selling Expenses 639 Administration Expenses 421 Depreciation 40 1100 EBIT 1040 Less:Interest (112) Earnings before Tax 928 Less:Tax 30% (278) Profit after Tax 650 Statement of Financial Position as at 31 December 2019. Assets Page 4 of 5 Fixed Assets 451 Current Assets Stock 985 Debtors 478 Cash and Bank 128 1591 2042 Equity and Liabilities Ordinary Shares (125 000) Shares 920 Retained Earnings 320 1240 Long Term Debt Debentures 500 Current Liabilities Creditors 224 Bank Overdraft 78 802 2042 Required: Calculate the following financial ratios for Cox Limited. (20) 1.1 Current Ratio (3) 1.2 Acid Test Ratio (4) Page 5 of 5 1.3 Gross Profit % (3) 1.4 Net Profit % (4) 1.5 Debt Ratio (4) 1.6 Return on Equity (4) 1.7 Return on Total Assets (4) 1.8 Interest Coverage Ratio (4) Suppose you are the finance manager of Cox Limited and after calculating the above ratios you present them to the board of directors with the intention of providing them with insight on how the business performed over the last year. After your presentation, one of the directors argues that the board cannot rely sorely on your presentation to gain insight on how the business has performed. He argues that a lot of crucial information is missing from your presentation. You are now required to clarify to the rest of the board members and explain to them why they cannot base their analysis of the health of the business sorely on the figures you have presented above. (20 marks)