The excerpts of the financial statements of Octopus Limited for the year ended 31 December 2022 are shown below.

Octopus Limited

Statement of comprehensive income for the year ended 31 December 2022

2022 2021

R R

Sales 120 000 000 105 000 000

Gross profit 48 000 000 42 000 0000

Other operating income 8 500 000 7 500 000

Operating expenses (35 000 000) (33 000 000)

Operating profit 21 500 000 16 500 000

Finance income 1 450 000 1 200 000

Finance costs (1 890 000) (I 950 000)

Profit before tax 22 941 100 15 750 000

Income tax (6 882 330) (4 725 000)

Profit after tax 16 058 770 11 025 000

Octopus Limited

Statement of financial position as at 31 December 2022

2022 2021 2020

R R R

Assets

Non-current assets 32 850 000 29 950 000 26 000 000

Inventories 8 250 000 5 645 000 7 250 000

Accounts receivable 3 940 000 5 525 000 4 950 000

Cash 960 000 880 000 800 000

Total assets 46 000 000 42 000 000 39 000 000

Equity and liabilities

Ordinary share capital (460 000 shares) 15 000 000 15 000 000 15 000 000

Retained earnings 9 580 000 7 200 000 6 800 000

Long-term loan (18%) 9 230 000 10 500 000 12 000 000

Accounts payable 5 140 000 4 325 000 3 750 000

Other current liabilities 7 050 000 4 975 000 1 450 000

Total equity and liabilities 46 000 000 42 000 000 39 000 000

Using the financial statements provided above, calculate the following ratios for the 2022 financial year (show all

calculations, including the analytical formula used to calculate each ratio):

2.1 Net operating profit margin (2 marks)

2.2 Return on total assets (2 marks)

2.3 Return on capital employed (2 marks)

2.4 Times interest earned (2 marks)

2.5 Capital gearing ratio (2 marks)