QUESTION ONE You are provided with the following summarised information relating to Virgo Limited, a wheel caps and rims distributor: Statement of Financial Position (balance sheet) as at 31 December 2019: Assets Non-current assets Cash Inventory Trade debtors TOTAL ASSETS Equity Shareholders' Equity Liabilities Long term loan (15% p.a.) Accounts payable Dividends payable TOTAL EQUITY AND LIABILITIES 2019 R 936 000 168 000 432 000 288 000 1 824 000 1 152 000 408 000 216 000 48 000 1 824 000 Statement of Comprehensive Income (income statement) as at 31 December 2019: Sales Less Cost of Sales Gross Profit Operating profit Interest expense Profit before tax Income taxation Net profit for the year 2019 R 4 800 000 3 120 000 1 680 000 720 000 48 000 672 000 268 800 403 200 Additional Information: 1. All purchases and sales of inventories are on credit. Inventories on 31 December 2018 amounted to R300 000. 2. The authorised share capital consists of 500 000 shares of which 300 000 were issued. 3. Interim dividends paid during the year amounted to R113 280. 4. The shares of Virgo Limited were trading at 350 cents per share on the stock/securities exchange on 31 December 2019. 5. The following ratios are available as at 31 December 2019 and 2018: 2019 21.9 days 35% 2018 37.6 days 28% 11.2 times 1.42:1 24.56% Debtors collection period Return on equity Inventory turnover rate Acid test ratio 8 times 1.73:1 Debt to Equity 35.42% Current ratio ? 2.15:1 Creditors payment period ? 35 days Required: 1.1. Use the information provided above to calculate the following ratios for 2018. Where applicable, round off answers to two decimal places. 1.2 Turnover to net assets. Creditor payment period. Earnings retention ratio. Return on capital employed. Price earnings ratio. Current ratio. Using the ratios calculated in question 1.1 and the ratios provided in the additional information to answer the following questions: 1.2.1 Comment on the liquidity and working capital management of the company. 1.2.2 Use two (2) appropriate ratios to advise Virgo Limited whether it should increase its long term loan in order to expand its operations in the next year. Guidelines: All answers must be typed out and workings must be showing.