Question: Answer the following questions based on the ratios provided by Creole Limited below: 2.2.1 Comment on the following ratios: Debt to assets Interest coverage Gross

Answer the following questions based on the ratios provided by Creole Limited below:

2.2.1 Comment on the following ratios:

Debt to assets

Interest coverage

Gross margin (Gross profit margin)

Earnings per share (8 marks)

2.2.2 What recommendations would you make in respect of the liquidity of Creole Limited? (2 marks)

INFORMATION

The following are the ratios of Creole Limited for 2022 and 2021:

2022 2021

Current ratio 4.22:1 2.50:1

Acid-test ratio 0.88:1 1.84:1

Debtor collection period 45 days 29 days

Inventory turnover 12 times 18 times

Debt to assets 32% 43%

Interest coverage 9 times 10 times

Gross profit margin 43% 49%

Earnings per share 170 cents 195 cents

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