You are the managing Director of Multiple (PTY) Ltd, a company based in Angola. Multiple is looking to penetrate the Botswanan market and decides to do this via the acquisition of an already operational company in Botswana.

Two companies, Botshelo Ltd and Maikano Ltd are presented to you as the MD. You are more interested in the profitability of the company rather than liquidity.

The following are extracts of the financial statements of the two companies for two years. Use them to answer the questions that follow.

BOTSHELO MAIKANO

year ended	31/03/22 Pm	31/03/21 Pm	31/03/22 Pm	31/03/21 Pm
Revenue Cost of sales Gross Profit Other Operation expenses Profit from operations Finance cost Profit before tax Income Tax expense Net Profit for the period	600 (300) 300 (120) 180 (20) 160 (50) 110	550 (250) 300 (105) 195 (19) 177 (55) 122	620 (320) 300 (90) 211880 (22) 188 (78) 110	560 (260) 300 (85) 215 (20) 195 (90) 105
Non-Current Assets Inventories Trade receivables Cash Total Share Capital Reserves Interest Bearing borrowings Current liabilities	600 60 80 10 750 150 360 510 150 90 750	570 50 75 20 715 150 320 470 150 95 715	455 55 90 15 615 110 185 295 240 80 615	440 50 80 15 585 110 155 265 240 80 585

Required

a. Calculate the following profitability ratios for both years and for each of the two companies;

i) Gross profit Margin

ii) Operating profit Margin

III) Return on assets

b) Based on your calculations above, comment on the profitability of the two companies

Answer rating: 100% (QA)

a Gross Profit Margin Gross Profit Revere Operating ... View the full answer