QUESTION ONE $[26]$

You have been hired as an analyst for Cap Bank and your team is working on an independent

assessment of Food Ltd which is a firm that specialises in the sale of poultry products from

France. Your assistant has provided you with the following data for Food Ltd and the

associated industry.

Required

$1\mathrm{.}1$ Calculate the following ratios:

$1\mathrm{.}1\mathrm{.}1$ Debt ratio. $(2)$

$1\mathrm{.}1\mathrm{.}2$ Inventory turnover. $(2)$

$1\mathrm{.}1\mathrm{.}3$ Debtors$$ days. $(2)$

$1\mathrm{.}1\mathrm{.}4$ Current ratio. $(2)$

Round your answers to two decimal points.

$1\mathrm{.}2$ In the $2023$ annual report to the shareholders, the CEO of Food Ltd wrote $2023$ was

a good year for the firm with respect to our ability to meet our short$-$term obligations.

We had high liquidity due to the availability of current assets $($cash$,$ account receivables

and short$-$term marketable securities$).$ Is the CEO correct? Is the company$$s

performance in this regard acceptable? Explain your answer using the relevant

information above. $(6)$

$2023$

Industry Average

Debt Ratio $?0,500,450,55$

Inventory Turnover $?42,2533,2553,25$

Debtors Days' $?98,6794,72130,25$

Profit Margin $0,080,070,060,08$

Current Ratio $?1,511,411,35$

Quick Ratio $?0,600,700,50$

Times Interest Earned $?2,502,602,60$

Ratio $202320222021$

Relevant information: R$\text{'}$m

Non Current Assets $600000$

Debtors $200000$

Stock $100000$

Cash $50000$

Non Current Liabilities $300000$

Creditors $320000$

Average Debtors $200000$

Average Inventory $200000$

Credit Sales $70000$

Earnings before Net Interest and Tax $270000$

Interest Expense $300000$

Cost of Sales $45000$

$1\mathrm{.}3$ Please comment on the company$$s efficiency ratios in $2023.$ Please include in your

answer what these ratios represent. $(6)$

$1\mathrm{.}4$ Please provide an assessment of the firm's solvency ratios at year end $2023.$ Please

include in your answer what these ratios represent. $(6)$