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QUESTION 3 [25 MARKS] BJs Ltd manufactures products that are used in the construction industry. The company has been successful in the management of its working capital and liquidity. However, 2020 has been different. Calculate the working capital and liquidity ratios for BJs Ltd given the following financial information: The following is an extract of the trading account in the income statement: 2020 2019 R000 R000 Sales 2,065 1,789 Cost of sales (1,479) (1,304) Gross profit 586 485 Extract from the statement of financial position ASSETS 2020 2019 R000 R000 Current assets Inventory 119 109 Debtors (refer to note 1) 401 347 Short-term investments 4 19 Cash 48 48 572 523 EQUITY AND LIABILITIES Noncurrent liabilities Loans and overdrafts 49 35 Taxes 62 47 Dividend 19 14 Creditors (refer to note 2) 371 324 501 420 Net current assets 71 103 Notes: 1. Amount of trade receivables in debtors amount 330 285 2. Amount of trade payables in creditors amount 236 211 The company is in the manufacturing industry. Its products are used in the construction industry. Required: 3.1 Calculate liquidity and working capital ratios. (12) 3.2 Comment on the calculated ratios. (8 marks on liquidity ratios plus 5 marks on (13) working capital ratios)

BJs Ltd manufactures products that are used in the construction industry. The company has been successful in the management of its working capital and liquidity. However, 2020 has been different. Calculate the working capital and liquidity ratios for BJs Ltd given the following financial information: The following is an extract of the trading account in the income statement: 2020 R'000 Sales 2,065 Cost of sales (1.479) Gross profit 586 2019 R'000 1,789 (1.304) 485 Extract from the statement of financial position 2020 R'000 2019 R'000 ASSETS Current assets Inventory Debtors (refer to note 1) Short-term investments 119 401 4 48 572 109 347 19 48 523 Cash EQUITY AND LIABILITIES Noncurrent liabilities Loans and overdrafts Taxes Dividend Creditors (refer to note 2) 49 62 19 371 501 35 47 14 324 420 Net current assets 71 103 Notes: 1. Amount of trade receivables in debtors amount 2. Amount of trade payables in creditors amount 330 285 211 236 The company is in the manufacturing industry. Its products are used in the construction industry. Required: (12) 3.1 Calculate liquidity and working capital ratios. 3.2 Comment on the calculated ratios. (8 marks on liquidity ratios plus 5 marks on working capital ratios) (13)