QUESTION FIVE [20]

The following extract appeared in the financial statements of Sihle Limited:

Sihle Limited

Extract from the Statement of Comprehensive Income for the year ended 31 December 2019:

	R
Sales	4 140 000
Cost of sales	(3 490 000)
Opening inventory	710 000
Purchases	3 630 000
Gross profit	650 000
Operating expenses	(429 000)
Operating profit	221 000
Interest expense	(35 000)
Profit before tax	186 000
Taxation	(52 800)
Profit after tax	133 200

Additional information:

• Dividends paid during the year amounted to R65 000.
• The market price per share on 31 December 2019 was R55.
• The company has ordinary share capital of 20 000 shares issued at R1 each.

Use the information provided above to calculate the following ratios for 2018:

5.1.1 Net profit margin (2)

5.1.2 Earnings retention ratio (2)

5.1.3 Price earnings ratio (2)

5.1.4 Dividend per share (4)

5.2 Comment on each of the following ratios of Sihle Limited: (10)

Ratio	Sihle Limited	Industry average
5.2.1 Acid test ratio	0.8:1	1.2:1
5.2.2 Current ratio	2.30:1	2.80:1
5.2.3 Debtors collection period	39.28 days	30 days
5.2.4 Inventory turnover	4.75 times	6.5 times
5.2.5 Return on equity	14.1%	19.2%