Question 3 The following annual financial statements have been presented to you by Absolom Hainana, the owner of Absolom Fashions: ABSOLOM FASHIONS STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 2015 2016 N$ N$ ASSETS Non-current assets 45 000 35 000 Equipment at carrying value 205 000155 Current assets 80 000 60 000 Inventory 100 000 35 000 Trade debtors 15 000 Marketable securities 20 000 10 000 40 000 Cash TOTAL ASSETS 240 000 200 000 EQUITY AND LIABILITIES Equity 195 000145 000 Opening balance 130 000 Capital contribution 33 000 Net profit 39 500 20 000 217 500 150 000 Drawings (22 500) (5 000) Non-current liabilities Long term loan 12 500 45 00042 500 Current liabilities 2 500 Accrued expenses 8 000 37 000 40 Trade creditors TOTAL EQUITY AND LIABILITIES 200 000 240 000 ABSOLOM FASHIONS STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 2016 N$ 400 000 Sales (300 000) Cost of sales Gross Profit (60 500) Expenses (60 000) Operating expenses (including R10 000 depreciation) (500) Loss on sale of shares 39 500 Net profit for the year Absolom is concerned about the de terioration in her cash position during the past year. She explained that, apart from the net profit of N$39 500 made by the enterprise, she also contributed additional capital amounting to N$33 000. Before making a final decision on whether to close her enterprise, she approached you for advice. You are required to: a) Calculate the following financial ratios for 2016: i. Current ratio; ii. Acid test ratio; ii. Gross profit percentage; iv. Net profit percentage; Return on capital; v. vi. Inventory turnover rate (days); and (21 marks) Debtors collection period (days). vii. b) Prepare a report for Absolom in which you explain the financial position of the 4 marks) business based on the results of the above ratios. Please note that a year has 365 day Total 25 marks)