Which one of the following statements is true when analysing the debt/equity ratio of Leather Boots (Pty) Ltd.?

• A. The debt/equity ratio worsened from 2020 to 2021, and the company now has more debt than equity financing.
• B. The debt/equity ratio improved from 2020 to 2021, but the company still has more debt than equity financing.
• C. The debt/equity ratio improved from 2020 to 2021, and the company now has less debt than equity financing.
• D. The debt/equity ratio remained constant from 2020 to 2021, and the company has more debt than equity financing.
• E. The debt/equity ratio worsened from 2020 to 2021, but the company still has less debt than equity financing.

ADDITIONAL INFORMATION: Financial ratios A. Current ratio B. Acid test ratio C. Debtors' collection period D. Creditor's payment period E. Inventory turnover rate F. Gross profit percentage G. Net profit percentage H. Return on equity I. Debt equity ratio 2021 ? ? ? ? ? ? ? ? ? 2020 2.92 : 1 1.28:1 16 days 27 days 24 times/year 35% 10,29% 210,53% 0.74 Leather Boots (Pty) Ltd Extract from the statement of profit or loss and other comprehensive income for the year ending 31 December 2021 2021 2020 Revenue (40% on credit) 3 550 000 3 500 000 (2 307 500) (2 275 000) Cost of sales (30% on credit) Net profit after tax 50 000 360 000 Leather Boots (Pty) Ltd Statement of financial position on 31 December 2021 2021 Assets Non-current assets 125 000 120 000 Property, plant and equipment 125 000 120 000 Current assets 188 000 178 000 Inventory 110 000 100 000 Trade debtors 75 000 66 000 Accrued income 3 000 4 000 Bank (dt) 0 8 000 Total assets 313 000 298 000 Equity 176 000 171 000 Ordinary shares 51 000 51 000 Retained earnings 125 000 120 000 Non-current liabilities 47 000 66 000 Long-term loans 47 000 66 000 Current liabilities 90 000 61 000 Trade creditors 66 000 53 000 Income tax 4 000 8 000 Bank overdraft (ct) 20 000 0 Total equity and liabilities 313 000 298 000 IMPORTANT: Assume 365 days in a year. Round off your ratio calculations to two decimal points for interpretation purposes. Carefully study all the information provided to answer the multiple-choice questions on eFundi. 2020