QUESTION 4 The following and the summarised financial statements for two similar retail stores, Carp Ltd and River Ltd, both selling children's scooters Extract of Income Statements for the year ended 30 June 2019 Carp Ltd River Ltd Sales 80,000 120,000 Cost of Sales 60,000 96,000 Gross Profit 20,000 24,000 Administration Costs 1,000 3,000 Distribution Costs 9,000 6,000 10.000 9,000 Operating Profit 10,000 15,000 River Ltd Statements of Financial Position as at 30 June 2019 Carp Ltd ASSETS Non-Current Assets: Equipment 2,000 Current Assets: Inventories 15,000 Trade receivables 25,000 Bank 5,000 45,000 47,000 14,000 17,500 20,000 2,500 40,000 54,000 5,000 10,000 EQUITY AND LIABILITIES Current Liabilities: Trade payables Equity: Ordinary 1 shares Share premium Retained profits 25,000 5,000 12,000 20,000 8,000 16,000 42,000 47,000 44,000 54,000 Page 86 Required a) Calculate the following ratios; i) Gross profit margin ii) Operating profit margin iii) Current ratio iv) Acid test ratio V) Inventory days vi) Trade receivable days vii) Trade payable days (14 marks) b) Briefly interpret the ratios you have computed for the two companies, under the headings of profitability, liquidity and activity. (11 marks) (25 MARKS)