QUESTION ONE [30] You are an industry analyst working for a bank. The financial information provided below is for the two companies operating in same industry. All sales in both companies are on credit. Statement of profit or loss and other comprehensive income for year ended 30 June 2022 Tango (Pty)Ltd Cash (Pty) Ltd R R Turnover(sales) 8 200 000 6 300 000 Less: Variable cost (6 430 000) (4 420 000) Cost of sales (6 230 000) (4 160 000) Selling (200 000) (260 000) Contribution 1 770 000 1 880 000 Less: Total fixed cost (excl. interest) (840 000) (690 000) Administration (180 000) (140 000) Production (600 000) (510 000) Selling (60 000) (40 000) EBIT 930 000 1 190 000 Interest expense (100 000) (90 000) Earning before tax (EBT) 830 000 1 100 000 Taxation (249 000) (330 000) Profit after tax (EAIT) 581 000 770 000 Dividends (174 000) (288 000) Profit for the year R 407 000 R 482 000 Statement of financial position at 30 June 2022 Tango (Pty) Ltd Cash (Pty) Ltd R R ASSETS Non-current assets Property, plant and equipment carrying amount 6 200 000 8 630 000 Current assets: 2 760 000 2 970 000 Inventory 1 340 000 1 060 000 Trade and other receivables 1 360 000 1 820 000 Cash and cash equivalents 60 000 90 000 Total current assets 8 960 000 11 600 000 EQUITY AND LIABILITIES Equity 6 600 000 8 700 000 Share capital 3 850 000 5 150 000 Retained earnings 2 750 000 3 550 000 Non- current liabilities Long-term loan 600 000 700 000 Current liabilities 1 760 000 2 200 000 Bank overdraft 230 000 220 000 Trade and other payables 1 070 000 1 460 000 Other current liability 460 000 520 000 Total equity and liabilities 8 960 000 11 600 000 You are required Calculate the following ratios for both Tango (Pty) and Cash (Pty), do not use average ratios: 1.1 Debt/Equity ratio (3) 1.2 Current ratio (2) 1.3 Acid test ratio (2) 1.4 Inventory turnover (4) 1.5 Debtor collection period (4) 1.6 Prepare a report for the banks risk manager in which you compare liquidity, and profitability of the two companies. Your report must be based on and limited to the ratios calculated above. (15)