QUESTION $3(20$ Marks$)$

John & Sons and Spencer$$s are companies in wholesalers of clothing. Below are their financial statements

Statement of Comprehensive Income for the year ended $31$ December $2022$

John & Sons Spencer$$s

R$\text{'}000$ R$\text{'}000$

Sales $12001800$

Cost of Sales $9001300$

Gross Profit $300500$

Wages and overhead $180293$

Operating profit $120207$

Interest $207$

Net profit $100200$

Dividend $60100$

Retained profit $40100$

Statement of Financial Position as at $31$ December $2022$

John & Sons Spencer's

R$\text{'}000$ R$\text{'}000$

Fixed Assets

Buildings $120200$

Equipment $50100$

$170300$

Current assets

Inventory $180250$

Debtors $200300$

Bank $1200$

$500550$

Current Liabilities

Creditors $100210$

Bank o$/$d $040$

Dividend $60100$

$140350$

Net current asset $360200$

Fixed assets plus net current assets $530500$

Loans $($@$10\%)20070$

Net asset $330430$

Shareholders funds $($Equity$)$

Share capital $($all shares at R$1$ each$)230180$

Reserves $100250$

$330430$

Required

Calculate and briefly report on the ratios for the two companies above:

$1.$ Current ratio $(2$ marks$)$

$2.$ Acid test ratio $(2$ marks$)$

$3.$ Debtors collection period $($in days$)(2$ marks$)$

$4.$ Creditors payment period $($Use the cost of sales figure$)(2$ marks$)$

$5.$ Stock turnover $(2$ marks$)$

$6.$ Return on equity $($ROCE$)(2$ marks$)$

$7.$ Asset turnover $($Total assets$)(2$ marks$)$

$8.$ Which company would you prefer to invest in$,$ and give a reason? $(6$ marks$)$