FORMATIVE ASSESSMENT 1 [100 MARKS] Read the CASE Study below and answer ALL questions that follow CASE STUDY Information Established Manufacturers (Pty) Lid is a South African company specialising in producing and distributing electronic components. The company operates in a highly competitive market and sells its products locally and internationally. The year has been particularly eventful for the company, filled with growth, challenges, and critical decisions that will shape its financial future. Reflections on the Past Year The management team, led by CEO Mr Dlamini, reviewed the company's performance and presented the financial statements for Established Manufacturers (Pty) Lid for the year ended 30 June 2025: Income Statement for the Year Ended 30 June 2025 Amount (R'DOO) Sales 120,000 Cost of Sales (78,000) Gross Profit 42,000 Operating Expenses (30,294) Depreciation 4,200 Insurance 6,600 Salaries and Wages 15,000 Rent 4,494 Operating Profit 11,706 Interest Expense (3,156) Profit Before Tax 8,550 Income Tax Expense (30%) (2,565) Net Profit 5,985Statement of Financial Position as of 30 June 2025 Assets Amount (R'000) Non-Current Assets 66,800 Property, Plant, and Equipment 62,000 Intangible Assets 4.800 Current Assets 47,000 Inventory 15,800 Trade Receivables 20,400 Cash and Cash Equivalents 10,800 Total Assets 113,800 Equity 71.230 Share Capital 30,000 Retained Earnings 41,230 Non-Current Liabilities 20,000 Long-term Loan 20,000 Current Liabilities 22,570 Trade Payables 15,500 Short-term Loan 7.070 Total Equity and Liabilities 113,800 The Road Ahead Looking forward to the next financial year, the management team identified opportunities and challenges. Sales were evenly distributed over the past 12 months and are expected to grow by 5% in the next financial year, while the cost of sales remains constant at 65% of total sales revenue. Cost pressures are real in the current economy and the following have been identified: Salaries and Wages were incurred evenly throughout the year. However, this is expected to increase by 4.25% after the anticipated industry-wide union negotiations in October 2025. . Rent is paid quarterly, with the annual 10% increase effective 1 January 2026. . Insurance premiums are paid monthly and increase by 8% on 1 July, each year.QUESTION 4 (25 marks) Using the Projected Statement of Comprehensive Income and Projected Statement of Financial Position prepared in Questions 2 and 3, respectively, along with any other relevant information from the case study, calculate the following financial ratios for 2026: 4.1 Current Ratio (2 marks) 4.2 Acid-Test Ratio (2 marks) 4.3 Net Profit Margin (2 marks) 4.4 Return on Assets (2 marks) 4.5 Return on Equity (2 marks) 4.6 Debt-to-Equity Ratio (2 marks) 4.7 Interest Coverage Ratio (2 marks) 4.8 Creditors Collection Period (4 marks) 4.9 Inventory turnover period (3 marks) 4.10 Earnings per share (2 marks) 4.11 Earnings retention ratio (2 marks) NB: Where applicable, answers must be rounded to two decimal places