You have been employed as a Financial Analyst of Roswika $($Pty$)($Ltd$),$ a private company recently purchased by the government. Your immediate task is to assess the financial performance and health of the newly acquired company. The return on equity appears to be on a downward trend, although there was a spike in March $2022.$

$202120222023$

ROE $5\mathrm{.}90\%8\mathrm{.}31\%3\mathrm{.}15\%$

The extracts of the financial statements of Roswika $($Pty$)($Ltd$)$ for the year ended $31$ December $2023$ for your assessment are below:

Statement of Comprehensive Income

$202120222023$

R R R

Sales $775075083509508770500$

Cost of Sales $545075058505006455000$

Gross Profit $230000025004502315500$

Expenses $187500019607502050950$

Earnings before interest and tax $425000539700264550$

Interest $165000152500137500$

Profit before tax $26000087200127050$

Tax $7020010454434303\mathrm{.}50$

Profit after tax $18980028265692746\mathrm{.}50$

Number of ordinary shares $100000010000001000000$

Earnings per share $($R$0\mathrm{.}00)0\mathrm{.}190\mathrm{.}280\mathrm{.}09$

Dividends $100000100000100000$

Statement of Financial Position

$202120222023$

R R R

Non$-$Current Assets $485325051632505091000$

Property, Plant and Equipment $345075036507503557750$

Motor Vehicles $132500014350001455750$

Investment in SAC Ltd $775007750077500$

Current Assets $345750032602502993250$

Inventory $775000700750685000$

Trade Receivables $124500013250001457500$

Cash and Cash Equivalents $14375001234500850750$

Total Assets $831075084235008084250$

Equity and Liabilities

Equity $321725033999063392652$

Ordinary shares $100000010000001000000$

Retained Income $221725023999062392652$

Non$-$Current Liabilities $385000038800003334000$

Long$-$term loan $325000033400002854000$

Bonds $600000540000480000$

Current liabilities $124350011435941357597$

Trade creditors $124350011435941357597$

Total Equity and Liabilities $831075084235008084250$

Required:

$5\mathrm{.}1.$ Decompose Return on Equity using the Du Pont traditional approach. Identify and comment on the reasons for the fluctuation in return on equity. Analyse the performance to gross profit and expenses to sales level.

Marks will be allocated as follows:

$($a$)$ Calculations $(10)$