Question 4 (25 marks)

	Speed supermarket		Industry average (Benchmark)
	2019	2018	2019
Profitability:
Gross profit % (GP/sales)	14%	11%	12%
Net profit % (profit after tax/sales)	3%	1.8%	4%
Return on equity (profit/equity)	10%	8.30%	14.28%
Activity and Short-term liquidity
Current ratio	2.8:1	2.3:1	2.5:1
Acid-test ratio (Liquidity ratio)	1.5:1	1.7:1	1.9:1
Inventory turnover period (days)	10 days	5 days	7 days
Account payable turnover period (days)	45 days	35 days	40 days
Asset turnover (sales/total assets)	2	3	2.5
Long-term solvency (liquidity)
Debt ratio ( or debt-equity ratio)	40% (66.6%)	35% (53.8%)	30% (42.9%)
Investment ratios
P/E ratio	8	11	10
Dividend yield	2%	2.5%	3%

Required:

(a) Comment on the performance of Speed supermarket for the years of 2019 and 2018 with reference to the ratios above in the following areas:

a. Profitability

b. Activity and Short-term liquidity

c. Long term solvency

d. Investment

[20 marks]

(b) Based on the comment above, if you are a financial adviser, will you advise investors to buy the shares of this company? Justify your answer. [5 marks]