QUESTION 2

REQUIRED

2.1 Use the information provided below to calculate the ratios for 2022 (expressed to two decimal places) that would reflect each of the following. Note: Use the BELOW formulas provided in the formula sheet only

2.1.1 The efficiency with which the company can produce and sell its products before extraneous costs are deducted. (2 marks)

2.1.2 The amount of time taken by the company to pay its trade debts. (2 marks)

2.1.3 A measurement of the ability of management to use the company's net assets to generate sales revenue. (2 marks)

2.1.4 The amount of profit that the company generates in relation to its equity and borrowed capital. (2 marks)

2.1.5 The portion of the company's profit that is allocated to each outstanding ordinary share. (2 marks) 2.1.6 The percentage of the profit that has been put back into the company. (2 marks)

2.2 Comment on the following ratios by stating TWO (2) significant points in each case:

2022 2021 2.2.1 Profit margin (Net profit margin) 10.27% 7.85% (2 marks) 2.2.2 Price earnings ratio 7.25 times 5.32 times (2 marks) 2.2.3 Return on assets 42.86% 33.25% (2 marks) 2.2.4 Debt to assets 46.43% 55.67% (2 marks) INFORMATION Excerpts of the financial data of Premier Limited for 2022 are as follows: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 R Sales 7 500 000 Cost of sales 4 800 000 Operating profit 1 200 000 Interest expense 100 000 Profit before tax 1 100 000 Company tax 330 000STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 R Assets Non-current assets 1 400 000 Inventories 650 000 Accounts receivable 450 000 Cash 300 000 2 800 000 Equity and liabilities Ordinary share capital (500 000 shares) 1 200 000 Retained earnings 300 000 Long-term loan 600 000 Accounts payable 500 000 Dividends payable 200 000 2 800 000 Additional information 1. All purchases and sales of inventory are on credit. 2. Inventories amounted to R550 000 on 31 December 2021. 3. Interim dividends paid on 10 July 2022 amounted to R108 000.FORMULA SHEET Gross profit X 100 Profit after tax X 100 Sales No. of ordinary shares issued Operating profit X 100 Dividends for the year X 100 Sales 1 No. of ordinary shares issued 1 Profit after tax X 100 Retained earnings for the year X 100 Sales Profit due to ordinary shareholders 1 Cost of sales Earnings per share - Dividend per share X 100 Average inventory Earnings per share 1 Accounts receivable X 365 Market price per share Credit sales Earnings per share Accounts payable X 365 Current assets Credit purchases 1 Current liabilities Sales Current assets - Inventory Net assets Current liabilities Operating profit X 100 Total debt X 100 Total assets 1 Total assets 1 Operating profit X 100 Non-current debt X 100 Capital employed 1 Equity Profit after tax X 100 Operating profit Equity Interest expense