QUESTION ONE [30]EFM101[JUNE2021]

Harambee manufacturing (PTY) Limited is a company that produces industrial paints. Since the beginning of 2019, the products have been marketed mainly through Independent regional distributors instead of directly to completed product users, which was the previous policy. Your own company, which has substantial resources, is the major user of this products. We have recently been asked by the financial director of Harambee Limited whether your company will be willing to provide short-term loan finance at current market rates. You have been given access to the account of Harambee for the past three years extract those accounts are shown below. 2020 2019 2018 Rm Rm Rm Turnover 200 176 175 Statement of financial position as at 31 December 2020 2019 2018 Rm Rm Rm Assets Property, plant, and equipment 83 63 60 Current assets: Inventory 82 55 50 Trade debtors 55 42 33 Other receivables 2 1 2 Cash and cash equivalents 0 0 4 222 161 149 Equity and Liabilities Ordinary share of 1R each 31 31 21 Retained earnings 66 61 60 Long-term loans 35 24 37 Current liabilities: Trade creditors 36 25 22 Dividend for shareholders 2 0 5 Taxation 5 3 4 Bank overdraft 47 17 0 222 161 149 Page 3 of 5 1.1. Compute the relevant ratios for 2018, 2019, and 2020 required for an analysis of the companys liquidity and the management of its assets and the trade creditors. You are to assume 365 days in the year. (Use turnover, as cost of sales is not available). (10) 1.2. Discuss the ratios calculated in 1.1. above. (20)