QUESTION 4

Answer the questions from the information provided.

4.1 Comment on the ratios provided below which were calculated for a project of ABC Limited. (12 marks)

INFORMATION

	2021	2020	(2 marks) (2 marks) (2 marks) (2 marks) (2 marks) (2 marks)
Current ratio	2.78:1	1.45:1
Gross profit margin	50%	42%
Return on capital employed	24.20%	15.44%
Trade receivables period	38 days	29 days
Inventory turnover period	75 days	25 days
Acid test ratio	1.20:1	0.89:1

Additional information

		Credit terms to debtors are 30 days.
		The interest rate on long-term borrowing is 15% p.a.

FORMAT:

4.1

Current ratio

Gross profit margin

Return on capital employed

Trade receivables period

Inventory turnover period

Acid test ratio

(12 marks)

PLEASE ANSWER IN FULL USING THE TABLES ABOVE.