QUESTION ONE: ANALYSIS OF FINANCIAL STATEMENTS (12 Marks)

The following are extracts from the statements of comprehensive income and the statement of financial position of Kayak Explorers in respect of the financial years 2015 and 2016:

Extract from Statement of comprehensive income

2016 2015

R000 R000

Sales R1032 000 R784 000

Cost of goods sold 682 800 470 400

Interest expense 16 000 20 000

Profit before tax (after interest) 234 000 154 400

Profit after tax 163 800 108 080

Extract from statement of financial position

2016 2015

R000 R000

Ordinary Share capital 233 600 120 000

Accumulated profit-beginning of the year 340 000 220 000

Long-term debt (10% p.a) 160 000 200 000

Inventory 160 000 128 000

Trade Receivables 155 040 133 760

Cash 35 200 30 400

Trade Payables 171 800 96 000

Non-current assets at carry value 905 400 636 000

Assume that: 70. % of all sales are on credit. All purchases are on credit.

Question 1: Calculate the following ratios for both of the years 2016 and 2015, and comment on your findings

1.1 current ratio

1.2 acid test ratio

1.3 Days inventory on hand

1.4 Trade payables payment period