Answer ALL the questions in this section. QUESTION 1 Use the information provided below to answer the following questions: 1.1 Is the company solvent? Motivate your answer. (3 marks) 1.2 Calculate the earnings per share (expressed to the nearest cent). (3 marks) 1.3 Comment on the financial result of the company. (2 marks) 1.4 Provide an interpretation of the extract of the cash flow statement. (6 marks) From the information provided in all three financial statements, is the company likely to experience financial problems in the future? Motivate your answer by referring to each statement. (6 marks) INFORMATION The following information extracted from the accounting records of Supreme Limited, a company with an issued share capital of 500 000 ordinary shares: 1.5 Statement of Comprehensive Income for the year ended 31 December 2021 R Sales (all credit) 5 800 000 Cost of sales (3 700 000) Gross profit 2 100 000 Operating expenses (1 200 000) Operating profit 900 000 Interest expense (60 000) Profit before tax 840 000 Company tax (235 200) Profit after tax 604 800 Statement of Financial Position as at 31 December 2021 R Assets Non-current assets 1 100 000 Inventories 510 000 Accounts receivable 340 000 Cash 200 000 2 150 000 Equity and liabilities Equity 1 400 000 Long-term loan 500 000 Accounts payable 250 000 2 150 000 Extract of Cash Flow Statement for the year ended 31 December 2021 R Cash flows from operating activities 400 000 Cash flows from investing activities (700 000) Additions to plant and equipment (700 000) Cash flows from financing activities 350 000 Increase in long-term borrowings 350 000 Additional information Inventories on 31 December 2020 amounted to R390 000.