You are provided with the following information relating to Cheeky Ltd:

INFORMATION CHEEKY LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022

Sales ?

Cost of sales (6 765 000)

Gross profit 1 272 500

Operating expenses (922 500)

Earnings before interest and tax 350 000

Interest expense ?

Earnings before tax 227 500

Company tax ?

Earnings after interest and tax ?

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022

Assets

Non-current assets 1 462 500

Current assets 3 275 000

Total assets 4 737 500

Equity and liabilities

Shareholders equity 1 966 500

Non-current liabilities 1 282 500

Current liabilities 1 488 500

Total equity and liabilities 4 737 500

Note:

All the sales were on credit.

Company tax is calculated at 30% of the pre-tax profit.

Current assets include accounts receivable of R1 680 000 and inventories of R750 000.

The issued share capital of the company consisted of 100 000 ordinary shares.

REQUIRED: Use the information provided above to answer the following questions:

1.1 Calculate the following ratios. Express the answers to two decimal places.

1.1.1 Gross profit margin

1.1.2 Total asset turnover

1.1.3 Return on equity

1.1.4 Current ratio

1.1.5 Debt-equity ratio

1.1.6 Earnings per share

1.1.7 Finance cost coverage

1.2 Comment on the acid test ratio which was 1.12:1 in 2021 and 1.70:1 in 2022.

1.3 Suggest TWO (2) possible reasons for the drop in the gross profit margin ratio from 2021 to 2022.