QUESTION TWO

$[25]$

You are provided with the following summarised information relating to Firesafe Limited, a wheel caps and rims distributor:

Statement of Financial Position $($Balance Sheet$)$ as at $31$ December $2024$:

$\backslash$table$[[,2024,2013],[,$R$,$R$],[$ASSETS$,,],[$Noncurrent assets,,$],[$Property$,2600000,2360000],[,,],[$Current assets,$320000,340000],[$Inventory$,1000000,900000],[$Trade debtors,$3920000,3600000],[$Total assets,$2000000,2000000],[$EQUITY$,1400000,1000000],[$Share premium,,$],[$Retained Income,,$],[,,],[$LIABILITIES$,,],[$Current liabilities,$400000,],[$Bank overdraft,,$300000],[$Trade creditors,$3920000,],[,3600000,],[$Total Equity and Liabilities,,$]]$ Statement of Comprehensive Income $($Income Statement$)$ as at $31$ December $2024$:

$\backslash$table$[[,2024,2023],[,$R$,$R$],[$Sales$,3600000,3000000],[$Less Cost of Sales,$(2400000),(1600000)],[$Gross Profit,$1200000,1400000],[$Less Expenditure,$(300000),(240000)],[$Profit before interest and tax,$900000,1160000],[$Interest$,(100000),(80000)],[$Profit before tax,$800000,1080000],[$Taxation$,(240000),(320000)],[$Net profit for the year,$560000,760000]]$

Note:

$50\%$ of sales and purchases $($cost of sales$)$ are on credit.

Do not use average ratios.

Round off to two decimal places.

Required:

$2\mathrm{.}1.$ Calculate the following ratios for the two years ended $2023$ and $2024$:

$2\mathrm{.}1\mathrm{.}1.$ Current ratio

$(4)$

$2\mathrm{.}1\mathrm{.}2.$ Acid test ratio

$(4)$

$2\mathrm{.}1\mathrm{.}3.$ Inventory turnover

$(4)$

$2\mathrm{.}1\mathrm{.}4.$ Debtors collection period

$(4)$

$2\mathrm{.}1\mathrm{.}5.$ Creditors collection period

$(4)$

$2\mathrm{.}2$ Evaluate the performance of the business based on its profitability, liquidity and management of its working capital.

$(5)$