QUESTION 2 FINANCE (30) 2.1 Use the information provided below to calculate the following ratios and interpret them over the two-year period (2017-2018) taking into consideration the additional information provided on each ratio. Show your workings and where applicable, round off answers to two decimal places. 2.1.1 Acid test ratio 2.1.2 Inventory turnover [Inventory for 2016: 232 870) 2.1.3 Creditors payment period (Current credit terms from creditors are 60 days) 2.1.4 Debt to equity 2.1.5 Return on assets (Current rate on fixed deposits at banks- 8.15 %, Current rate at banks for business loans- 10%, the current inflation rate 4.4%) INFORMATION Rich Distance Distributors Income Statements for the year ended 31 December 2018 and 2017 Sales (all credit) Cost of sales (all credit) Gross profit Operating expenses: Selling, general and administrative Other expenses Operating profit Other income: Interest income Profit before interest Interest expense Profit before tax Tax Net profit after tax 2018 1 430 000 (645 420) 784 580 (378 204) 298 876 79 328 406 000 3 385 3 385 409 385 (8 749) 400 636 (85 970) 314 666 2017 1215 122 (589 990) 625 132 (482 035) 390 730 91 305 143 097 4568 4568 147 665 (8985) 138 680 (29 122) 109 558 Rich Distance Distributors Balance Sheets the year ended 31 December 2018 and 2017 2018 2017 837 550 706 840 641 952 653 874 215 312 250 439 274 440 255 615 152 200 147 820 1 479 502 1360 714 Assets Non-current assets Current assets: Inventories Accounts receivable Cash and cash equivalents Total assets Owners' equity and liabilities Owners' equity Non-current liabilities Current liabilities Accounts payable Other current liabilities Total owners' equity and liabilities 681 100 630 557 331 488 344 220 466 914 385 937 128 640 123 230 338 274 262 707 1 479 502 1360 714 2.2 Use the following information to calculate the economic order quantity: INFORMATION Rich Distance Distributors purchases 800 tablets at R2 500 each per annum. The tablets are sold at R3 000 each at a steady rate during the year. The cost of placing a single order amounts to R85. Inventory holding cost amounts to R5 per unit. 2.3 Use the following information to calculate the cost of not accepting a discount: INFORMATION Full-Time Wholesaler's normal credit terms to Rich Distance Distributors are 30 days but is prepared to allow a 4% rebate if Rich Distance Distributors pays the account within 10 days. Calculate the cost to Rich Distance Distributors of not accepting the discount