QUESTION$4$

$(20$ Marks$)$

REQUIRED

Use the information provided below to answer the following questions:

$4\mathrm{.}1.$ Calcultate 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

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

$(2$ marks$)$

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

$4\mathrm{.}1\mathrm{.}4.$ Earings 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 debt 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 $2023$

Sales $=$ R$990000$

Cost of sales $=$ R$600000$

Earnings before interest and taxes $=$ R$250000$

Interest expense $=$ R$30000$

Profif before tax $=$R$220000$

company tax $=$R$59400$

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER:

Non$-$current assets for:

$2023($R$)$ is $1368000$

$2022($R$)$ is $1140000$

Inventories for:

$2023($R$)$ is $360000$

$2022($R$)$ is $220000$

Accounts receivable for:

$2023($R$)$ is $180000$

$2022($R$)$ is $250000$

Cash and cash equivalents for:

$2023($R$)$ is $12000$

$2022($R$)$ is $10000$

Bank overdraft for:

$2023($R$)$ is $50000$

$2022($R$)$ is $40000$

Ordinary share capital for:

$2023($R$)$ is $1000000$

$2022($R$)$ is $800000$

Retained earings for:

$2023($R$)$ is $430000$

$2022($R$)$ is $220000$

Non$-$current liabilities for:

$2023($R$)$ is $240000$

$2022($R$)$ is $410000$

Accounts payable for: $2023($R$)$ is $200000$

$2022($R$)$ is $150000$

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 $2022$