Use the information provided below to answerthe following questions. (Answersto ratios must be expressed to two decimal places.)
2.1	Compare and comment on the profitability of both companiesby using the following ratios:
2.1.1	Return on capitalemployed	(4 marks)
2.1.2	Profit margin(Net profit margin)	(4 marks)
2.2	Calculate the earnings retentionratio of both companies and explain how shareholders can benefit froma higher retention ratio.	(6 marks)
2.3	Compare the two companies regarding the amount of debt that each company uses to finance its assets (as a percentage).	(4 marks)
2.4	Suggest TWO (2) ways in which KLM Limited can improve its gross profit marginratio, without increasing itsselling prices.	(2 marks)

INFORMATION

Extracts for the year ended 31 December 2022 of the Statement of Comprehensive Income and Statement of Financial Position are given below for two companies viz. KLM Limited and ZAP Limited.

Extract of Statement of Comprehensive Income for the year ended31 December 2022
	KLM Limited	ZAP Limited
	R	R
Sales	6 800 000	2 000 000
Cost of sales	4 600 000	864 000
Depreciation	280 000	40 000
Otheroperating expenses	260 000	50 000
Interest on loan	180 000	60 000
Companytax	414 400	276 080

Note: All the income and expenses of both companies are included in the figures above.

Extract of Statement of Financial Position as at 31 December 2022
	KLM Limited	ZAP Limited
	R	R
Non-current assets	1 960 000	1 240 000

Current assets	1 715 000	410 000
Sharecapital	2 000 000	1 000 000
Retained earnings	240 000	80 000
Non-current liabilities(15%)	1 020 000	460 000
Current liabilities	415 000	110 000

Extract of Statement Changes in Equity for the year ended 31 December 2022
	KLM Limited	ZAP Limited
Dividends for the year	R518 000	R276 000