QUESTION $4$

$(25$ MARKS$)$

Use the information provided below to answer the following questions.

$4\mathrm{.}1.$ Explain the use of the accounting concept of conservatism when the financial statements of Mayfair Limited are prepared.

$(4$ Marks$)$

The following questions apply to the financial year ended $31$ December $2023$

$4\mathrm{.}2.$ Comment on the financial result of the company

$(4$ Marks$)$

$4\mathrm{.}3.$ Was the company efficient in its collection of debts arising from credit sales? Motivate your answer by using and appropriate ratio.

$(6$ Marks$)$

$4\mathrm{.}4.$ Will creditors allow credit to Mayfair limited under distress business conditions? Explain your answer with the relevant ratio.

$(6$ Marks$)$

$4\mathrm{.}5.$ From the point of view of the shareholders, would they be happy with the profitability of the company? Use an appropriate ratio to motivate your answer.

$(5$ Marks$)$

INFORMATION

Extracts from the Income Statement and Balance Sheet of Mayfair Limited for $2023$ and $2022$ are as follows:

Extracts of Income Statement for the year ended $31$ December:

$\backslash$table$[[,2023(R),2022(R)$