The CEO intends to seek further funding for the project, by presenting the companys financial performance and standing to potential investors. Presented below are the summarized accounts for TempoZoom.

TempoZoom

Income statement for the year ended 31 June 2021

	$000
Revenue	40 500
Cost of sales	(15 000)
Gross Profit	25 500
Selling, Distribution and Administrative expenses	(10 500)
Profit from operations	15 000
Finance cost	(3 750)
Profit before tax	11 250
Tax expense	(2 500)
Net profit for the period	8 750

Statement of Financial Position as at 31 June 2021

	$000	$000
Assets
Non-Current Assets
Other financial assets	1 400
Property, plant and equipment	9 100
Total non-current assets		10 500
Current Assets
Cash and cash equivalents	2 400
Trade and other receivables	1 100
Inventories	1 200
Total current assets		4 700
Total Assets		15 200
Current Liabilities
Trade and other payables	2 300
Total current liabilities		2 300
Non-current liabilities
Long term borrowings	3 800
Total non-current liabilities		3 800
Total liabilities		6 100
Equity
Share capital	350
Retained earnings	8 750
Total equity		9 100
Total liabilities and equity		15 200

a. In addition to the financial statements presented above, key financial ratios indicating the profitability, efficiency and liquidity of the company for the past year has been compiled, together with their respective industry averages for benchmarking.

Calculate the ratio values (to one decimal place) for TempoZoom for the year ended 31 June 2021 as follows:

Ratios	Historical Data		Industry Average
	2020	2021	2021
Operating Profit Margin (%)	29.5		36.3
Return on Capital Employed (%)	148.1		120.4
Quick/Acid Test ratio (%)	1.3		1.4
Times Interest Earned (times)	3.5		3.8
Debt ratio (%)	0.3		0.3

(5 marks)

b. Interpret the following ratios for TempoZoom for the year ended 31 June 2021 to the CEO.

1. Operating Profit Margin
2. Return on Capital Employed
3. Quick/Acid test ratio
4. Times interest earned
5. Debt ratio

(15 marks)

c. Critically discuss FIVE limitations of financial ratio analysis to the CEO. (5 marks)