Question 3

INFORMATION The information given below was obtained from the books of Libra Limited on 31 December 2021, the end of the financial year.

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER

	2021	2020
	R	R
ASSETS
Non-current assets	988 400	933 200
Property, plant and equipment	988 400	933 200
Current assets	576 200	446 000
Inventory	102 600	109 200
Accounts receivable	397 600	304 800
Bank	75 300	31 100
Cash Float	700	900
	1 564 600	1 379 200
EQUITY AND LIABILITIES
Equity	755 400	661 400
Ordinary share capital (issue price R1 each)	620 000	548 000
Retained income	135 400	113 400
Current Liabilities	700 000	396 000
Mortgage bond (18% p.a)	700 000	396 000
Current Liabilities9	109 200	321 800
Accounts payable	60 000	236 600
Company tax payable	43 000	37 600
Dividends payable	6 200	47 600
	1 564 600	1 379 200

EXTRACT FROM THE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021

	R
Sales	800 000
Cost of sales	320 000
Interest on Loan	93 600
Depreciation on Vehicles	82 200
Depreciation on Equipment	72 200
Operating profit	253 400
Profit before tax	159 800
Company tax	77 400
Profit after tax	82 400

QUESTION 4

EXTRACT FROM THE STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021

Ordinary share dividends for the year: R60 400

Property, plant and equipment	2021	2022
	R	R
Vehicles (Cost)	490 000	556 000
Accumulated Depreciation on Vehicles	167 200	96 200
Equipment (Cost)	1 060 400	796 000
Accumulated Depreciation on Equipment	394 800	322 600

Note: A vehicle was sold for R54 800 during the year, but no new vehicles were bought. Equipment was purchased for cash but no equipment was sold.

ADDITIONAL INFORMATION

All purchases of inventories are on credit.

Use the information provided in QUESTION 3 to answer the following questions:

4.1 Calculate the following ratios for 2021. Express the answers to two decimal places.

4.1.1 Profit margin (2 marks)

4.1.2 Creditors payment period (2 marks)

4.1.3 Return on assets (2 marks)

4.1.4 Earnings per share (2 marks)

4.1.5 Interest coverage (2 marks)

4.1.6 Current ratio (2 marks)

4.1.7 Debt to equity (2 marks) The management of Libra Limited intends making improvements in respect of the financial performance. Provide two suggestions each that will assist the management with improving the following:

4.2

4.2.1 The profit that the company makes after paying off its cost of sales (2 marks)

4.2.2 The collections from credit sales (2 marks)

4.2.3 The rate at which inventory is sold (2 marks)