QUESTION 4 

REQUIRED

Use the information provided below to answer the following questions. Answers to the ratios must be expressed to two decimal places.

4.1 What percentage of the sales is made up of net income? (2 marks)

4.2 Calculate TWO (2) appropriate liquidity ratios and comment on the liquidity of the company. (6 marks)

4.3 Calculate the relevant ratios and comment on the effectiveness with which the company has employed the debtors and creditors. (6 marks)

4.4 Calculate TWO (2) appropriate ratios that would be used to assess the profitability of the company by examining the income from operations and the after-tax returns earned. Comment on your calculations. (6 marks)

INFORMATION -Excerpts of financial data of Markram Limited for 2022 are as follows:

Statement of Comprehensive Income for the year ended 31 December 2022

	R
Sales	6000000
Cost of sales	4000000
Opening inventory	200000
Purchases	?
Closing inventory	500000
Opening profit	1200000
Interest expense	200000
Profit before tax	1000000
Company tax	270000

Statement of Financial Position as at 31 December 2022

	R
Non-current assets	3500000
Inventories	500000
Accounts receivable	1400000
Cash	2000
Bank overdraft	30000
Ordinary share capital	940000
Retained earnings	132000
Long term loan	3600000
Accounts payable	700000

Additional information

Ninety percent (90%) of the sales is on credit.

All purchases are on credit. Credit terms to debtors are 60 days and credit terms from suppliers are 90 days.

Answer rating: 100% (QA)

Lets break down each question 41 What percentage of the sales is made up of net income To find the net income we first need to calculate it using the information provided Net income is the profit afte... View the full answer