QUESTION $4(20$ Marks$)$

REQUIRED

Use the information provided below to answer the following questions.

$4\mathrm{.}1$ Calculate the following ratios for $2023$ only. Note: Use the formulas provided in the formula sheet

only $($that appear after QUESTION $5).$ Answers to the ratios must be expressed to two decimal

places.

$4\mathrm{.}1\mathrm{.}1$ Inventory turnover $(2$ marks$)$

$4\mathrm{.}1\mathrm{.}2$ Net profit margin $(2$ marks$)$

$4\mathrm{.}1\mathrm{.}3$ Debt$-$equity $(2$ marks$)$

$4\mathrm{.}1\mathrm{.}4$ Earnings per share $(2$ marks$)$

$4\mathrm{.}1\mathrm{.}5$ Finance cost coverage $(2$ marks$)$

$4\mathrm{.}1\mathrm{.}6$ Average collection period $(2$ marks$)$

$4\mathrm{.}2$ Will the company be able to pay its short$-$term debts if business conditions are

unfavourable? Motivate your answer by using an appropriate ratio. $(4$ marks$)$

$4\mathrm{.}3$ Will the shareholders of the company be satisfied with the return on their investments?

Support your answer with the use of an appropriate ratio. $(4$ marks$)$

INFORMATION

The extracts of the financial statements of Fabrice Limited for $2022$ and $2023$ are provided below.

FABRICE LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED $31$ DECEMBER $2023$

R

Sales $990000$

Cost of sales $600000$

Earnings before interest and taxes $250000$

Interest expense $30000$

Profit before tax $220000$

Company tax $59400$

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER:

$2023($R$)2022($R$)$

Non$-$current assets $13680001140000$

Inventories $360000220000$

Accounts receivable $180000250000$

Cash and cash equivalents $1200010000$

Bank overdraft $5000040000$

Ordinary share capital $1000000800000$

Retained earnings $430000220000$

Non$-$current liabilities $240000410000$

Accounts payable $200000150000$

Additional information

$1.$ All purchases and sales of inventories are on credit.

$2.$ The number of ordinary shares in issue during $2023$ was $500000.$

$3.$ Shareholders earned a return of $9\mathrm{.}71\%$ on their investments during $2022.$