QUESTION 4 (20 Marks) The following information represents the financial statements of Thabo Limited and Mancho Limited Comprehensive income statement for the year ended 31 December 2017 Thabo limited Mancho Limited Turnover 1 500 000 1 000 000 Less Cost of Sales 1 000 000 400 000 Gross Profit 500 000 600 000 Less Operating Expenses 300 000 200 000 EBIT 200 000 400 000 Less interest expense 20 000 10 000 EBT 180 000 390 000 Less Taxation 90 000 195 000 EAIT 90 000 195 000 Less dividends 50 000 60 000 Retained earnings for the year 40 000 135 000 Statement of financial position as at 31 December 2017 Thabo limited Mancho Limited ASSETS Property, plant and equipment 500 000 500 000 Accumulated depreciation (200 000) (100 000) Current Assets Inventory 60 000 40 000 Accounts receivable 50 000 20 000 Short-term financial assets 40 000 15 000 Cash at bank 50 000 25 000 TOTAL ASSETS 500 000 500 000 EQUITY AND LIABILITIES Ordinary shares 50 000 150 000 Reserves 70 000 30 000 Retained earnings 100 000 70 000 Liabilities Accounts payable 100 000 200 000 Long-term debt 180 000 50 000 TOTAL EQUITY AND LIABILITIES 500 000 500 000 Both companies have 100 000 ordinary shares issued. Also assume that Thabo Limited had opening inventories to the value of R20 000, while Mancho Limited's opening inventories amounted to R30 000 Required: Prepare a report for the CFO of your company in which you compare the risk, liquidity, asset management and profitability of the two companies. Your report must be based on and limited to the following supporting calculations 4.1 Debt and debtiequity ratio (4 marks) Current ratio and quick ratio (4 marks) Inventory turnover and total asset turnover (4 marks) Gross profit and Net profit margins (4 marks) Earnings per share and dividend per share (4 marks) 4.2 4.3 4.5 3