QUESTION 4 REQUIRED Use the information provided below to answer the following questions. Answers to the ratios
Question:
REQUIRED
Use the information provided below to answer the following questions. Answers to the ratios must be expressed to two decimal places.
4.1 What percentage of the sales is made up of net income? (2 marks)
4.2 Calculate TWO (2) appropriate liquidity ratios and comment on the liquidity of the company. (6 marks)
4.3 Calculate the relevant ratios and comment on the effectiveness with which the company has employed the debtors and creditors. (6 marks)
4.4 Calculate TWO (2) appropriate ratios that would be used to assess the profitability of the company by examining the income from operations and the after-tax returns earned. Comment on your calculations. (6 marks)
INFORMATION -Excerpts of financial data of Markram Limited for 2022 are as follows:
Statement of Comprehensive Income for the year ended 31 December 2022
R | |
Sales | 6000000 |
Cost of sales | 4000000 |
Opening inventory | 200000 |
Purchases | ? |
Closing inventory | 500000 |
Opening profit | 1200000 |
Interest expense | 200000 |
Profit before tax | 1000000 |
Company tax | 270000 |
Statement of Financial Position as at 31 December 2022
R | |
Non-current assets | 3500000 |
Inventories | 500000 |
Accounts receivable | 1400000 |
Cash | 2000 |
Bank overdraft | 30000 |
Ordinary share capital | 940000 |
Retained earnings | 132000 |
Long term loan | 3600000 |
Accounts payable | 700000 |
Additional information
Ninety percent (90%) of the sales is on credit.
All purchases are on credit. Credit terms to debtors are 60 days and credit terms from suppliers are 90 days.
Fundamental Accounting Principles Volume II
ISBN: 978-1259066511
14th Canadian Edition
Authors: Larson Kermit, Jensen Tilly