Question: 5 . 2 . The bank has informed the directors that they will be required to submit Damant Limited s financial statements for the year

5.2. The bank has informed the directors that they will be required to submit Damant Limiteds financial statements for the year ending 31 March 2025, as well as for each subsequent year within the loan term. This is necessary as the bank intends to calculate key financial ratios, including liquidity, interest cover, and gearing ratios, on an annual basis. The directors are uncertain about how to calculate these ratios and have sought your assistance in understanding why the bank may be interested in this information. Damant Limited currently pays 12% interest on its long-term borrowings. The extracts of Damant Limiteds financial statements for the year ended 31 March 2025 are provided below: Damant Limited Extract of Statement of profit or loss for the year ended 31 March 2025 R Revenue 15646000 Cost of sales 6795900 Gross profit 8850100 Operating expenses 4892600 Damant Limited Extract of Statement of financial position as at 31 March 2025 Non-current assets R Property, plant and equipment 5065600 Intangible assets 2000000 Financial investment 1154000 Current assets Inventory 2532400 Trade receivables 2412250 Cash 715000 Equity Ordinary share capital 5000000 Revaluation surplus 2892500 Current liabilities Trade payables 2178000 Accruals 229750 Tax payable 425000 REQUIRED: Using the extracts from Damants financial statements provided above, answer the following. 5.2.1. Calculate liquidity ratios and explain why AMD Bank is interested in each ratio (round off answer to two decimal places).(6 Marks)5.2.2. Calculate the interest cover and capital gearing ratio (round off answer to two decimal places) and explain why AMD Bank is interested in each ratio.

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