Question One The following are summarized financial statements of Anna Limited for the year ended 31st December 2022.Ccomparable figures for the previous year are also shown Income statement for the year ended 31st December 2022 2021 Shs 000 Shs 000 Sales 57,600 36,000 Less cost of goods (35,400) (21,000) GROSS PROFIT 22,200 15,000 Trading expenses (9,900) (8,100) Net profit before interest and tax 12,300 6,900 Less debenture interest (450) (450) Net profit before tax 11,850 6,450 Less corporate tax (5,760) (2,880) Net profit after tax 6,090 3,570 Less ordinary share dividend (3,150) (2,250) Undistributed profit for the year 2,940 1,320

N/B Assume 25% of the sales are on credit

Statement of financial position as at 31st December 2022 2021 Shs 000 Shs 000 Fixed assets 17,200 11,800 Less depreciation (4,500) (3,600) Inventories 9,900 7,200 Accounts Receivable 6,300 4,500 Marketable Securities 5,000 5,000 Cash/bank balance 0 1,440 Total Assets 33,900 26,340

Payables 3,600 2,610 Taxation 5,760 2,880 Bank overdraft 1,170 0 Proposed Dividend 3,150 2,250 Ordinary share capital Shs 25 per share 9,000 9,000 Undistributed profits 8,040 5,100 15% debentures-secured 3,180 4,500 Equity and Liabilities 33,900 26,340

Required: a) Compute the following ratios for Anna Limited for the year ended 31st December 2022 and where applicable comment on the answers computed based on your understanding of ratio analysis. i. Liquidity ratios - (4 Marks) ii. Leverage ratios (4 Marks) iii. Activity ratios (7 Marks) iv. Profitability ratios (5 Marks)

b) Discuss the limitations of ratio analysis (5 Marks) c) Discuss the limitations of financial analysis in the absence of accounting analysis (5 Marks)