QUESTION 4 (20 Marks) REQUIRED 4.1 Use the information provided below to calculate the following ratios for the financial year ended 31 December 2019. (Where applicable, express answers to two decimal places.) 4.1.1 Gross margin (2 marks) 4.1.2 Current ratio (2 marks) 4.1.3 Return on equity (2 marks) 4.1.4 Inventory turnover (2 marks) 4.1.5 Debt to assets (2 marks) 4.1.6 Earnings per share (2 marks) 4.1.7 Debtors collection period (2 marks) 4.2 Comment on the following ratios that have been calculated for Mersat Limited. Provide two significant comments for each. Ratio 2019 2018 4.2.1 Return on assets 23.15% 20.25% (2 marks) 4.2.2 Creditors payment period 68.32 days 59.56 days (2 marks) 4.2.3 Acid test ratio 2.36:1 0.87:1 (2 marks) INFORMATION Excerpts of the financial data of Mersat Limited for 2019 are as follows: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 R Sales 6 600 000 Cost of sales 4 614 000 Operating profit 1 446 000 Interest expense 240 000 Profit before tax 1 206 000 Profit after tax 868 320 vmc STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019 R ASSETS Non-current assets 3 840 000 Inventories 342 000 Accounts receivable 1 440 000 Cash 624 000 6 246 000 EQUITY AND LIABILITIES Ordinary share capital 600 000 Retained earnings 516 000 Long-term loan 4 254 000 Accounts payable 876 000 6 246 000 Additional information 1. Inventories on 31 December 2018 amounted to R276 000. 2. All purchases and sales of inventory are on credit. 3. 250 000 ordinary shares have been issued by the company. 4. The credit terms offered by suppliers are 60 days.