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SAMAs Distributors has appointed a new warehouse manager to assist with the re-organising of their infrastructure to increase their competitiveness. The firms financial statements for

SAMAs Distributors has appointed a new warehouse manager to assist with the re-organising of their infrastructure to increase their competitiveness. The firms financial statements for 2020 showed the following:

Excerpt from the 2020 Financial Statements of SAMAs Distributors:

Annual sales turnover R50 million Fixed assets R15 million Inventory R 5 million Debtors R 3 million Creditors R 5 million Cash in bank R 1 million Petty cash R 500 000 Purchases R 25 million Other operating costs R 5 million Cost of materials 50% of cost of sales

Using the above information, calculate the following for SAMAs Distributors:

Round all calculations to 2 decimal places.

(a) Profit margin (b) Asset turnover rate (c) Return on investment (d) Assuming a 5% reduction in material costs, what will the increase in profit be? (e) If the same profit increase as in (d) were to be generated by increasing sales, what increase in Rand would be required? Use the existing profit margin in your calculation.

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