QUESTION 5 Calculate the following ratios for 2021 and in each case state whether the ratio for the company is better or worse than the industry average. Where applicable, express answers to the ratios to two decimal places. The ratios for the industry for 2021 are provided in brackets.

5.1 Gross profit margin (Industry: 35.65%) (3 marks) 5.2 Trade receivables average number of days (Industry: 55.78 days) (3 marks) 5.3 Return on capital employed (Industry: 19.73%) (3 marks) 5.4 Current ratio (Industry: 1.98:1) (3 marks) 5.5 Acid test ratio (Industry: 0.97:1) (3 marks) 5.6 Debt to equity (Industry: 98.62%) (2 marks) 5.7 Inventory average number of days (Industry: 102.98 days) (3 marks)

INFORMATION Extracts of the financial statements of Mustang Limited are as follows: MUSTANG LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 R Sales (all credit) 9 645 000 Cost of sales 8 118 000 Profit before interest and tax/Operating profit 420 000 Profit before tax 273 000 Profit after tax 191 100

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 R Non-current assets 1 755 000 Inventory 900 000 Trade and other receivables (Trade receivables only) 2 016 000 Cash and cash equivalents 1 014 000 Ordinary share capital 2 000 000 Accumulated profit 359 800 Non-current liabilities 1 539 000 Current liabilities 1 786 200

Note: Credit terms to debtors are 60 days. Balances on 31 December 2020: Inventory R 660 000 Trade receivables R1 824 000