QUESTION FOUR

$(20$ MARKS$)$

REQUIRED

Use the information provided below to answer the following questions.

Note: Use the formulas provided in the formula sheet only $($that appear after QUESTION $5).$ Answers to the ratios must be expressed to two decimal places.

$4\mathrm{.}1$

What percentage of the sales is made up of net income?

$(2$ marks$)$

$4\mathrm{.}2$

Calculate TWO $(2)$ appropriate liquidity ratios and comment on the liquidity of the company.

$(6$ marks$)$

$4\mathrm{.}3$

Calculate the relevant ratios and comment on the effectiveness with which the company has employed the debtors and creditors.

$(6$ marks$)$

$4\mathrm{.}4$

Calculate TWO $(2)$ appropriate ratios that would be used to assess the profitability of the company by examining the income from operations and the after$-$tax returns earned. Comment on your calculations.

$(6$ marks$)$

INFORMATION

Excerpts of financial data of Markram Limited for $2022$ are as follows:

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

R

Sales

$6000000$

Cost of sales

$4000000$

Opening inventory

$200000$

Purchases

$?$

Closing inventory

$500000$

Operating profit

$1200000$

Interest expense

$200000$

Profit before tax

$1000000$

Company tax

$270000$

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

R

Non$-$current assets

$3500000$

Inventories

$500000$

Accounts receivable

$1400000$

Cash

$2000$

Bank overdraft

$30000$

Ordinary share capital

$940000$

Retained earnings

$132000$

Long$-$term loan

$3600000$

Accounts payable

$700000$

Additional information

$$ Ninety percent $(90\%)$ of the sales is on credit.

$$ All purchases are on credit.

$$ Credit terms to debtors are $60$ days and credit terms from suppliers are $90$ days.