REQUIRED

3.1 Use the information provided below to calculate the ratio (expressed to two decimal places) that would reflect each of the following

3.1.1 The amount of funds available relative to sales, to pay the companys expenses other than its cost of sales (expressed as a percentage)

3.1.2 The company's net income as a percentage of the company's net sales.

3.1.3 The ability of the company to generate profits from its shareholders investments in the company.

3.1.4 A measure of the dividend pay-out per share of the company's ordinary shares.

3.1.5 The capacity of the company to pay off its current commitments using just its most liquid assets.

3.1.6 The degree to which the companys assets are financed by debt.

3.1.7 A measure of how easily the company can pay the interest on its outstanding debt.

3.2 Comment on the following ratios:

2022 2021

1 Inventory turnover 15 times 19 times

Debtors collection period 40.50 days 26.35 days

Earnings per share 31.5 cents 41 cents

INFORMATION

Extracts of the financial statements of Turbo Limited for 2022 are given below.

TURBO LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022

R

Sales 8 000 000

Cost of sales 5 400 000

Operating profit 1 000 000

Interest expense 90 000

Profit before tax 900 000

Profit after tax 630 000

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022

R

Non-current assets 5 000 000

Current assets 2 000 000

Equity 5 400 000

Non-current liabilities 900 000

Current liabilities 700 000

Note:

1. Inventories on 31 December 2022 amounted to R360 000.

2. The issued share capital of Turbo Limited consisted of 2 000 000 ordinary shares.

3. Total dividends for the year ended 31 December 2022 amounted to R225 000.

4. Credit terms to debtors are 30 days