QUESTION 4

Answer the questions from the information provided.

4.1 Comment on the ratios provided below which were calculated for a project of ABC Limited. (12 marks)

INFORMATION

	2021	2020	(2 marks) (2 marks) (2 marks) (2 marks) (2 marks) (2 marks)
Current ratio	2.78:1	1.45:1
Gross profit margin	50%	42%
Return on capital employed	24.20%	15.44%
Trade receivables period	38 days	29 days
Inventory turnover period	75 days	25 days
Acid test ratio	1.20:1	0.89:1

Additional information

		Credit terms to debtors are 30 days.
		The interest rate on long-term borrowing is 15% p.a.

FORMAT:

4.1

Current ratio

Gross profit margin

Return on capital employed

Trade receivables period

Inventory turnover period

Acid test ratio

(12 marks)

PLEASE ANSWER IN FULL USING THE TABLES ABOVE.

ANSWER IN DETAIL!