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 $2024$:

$20242013$

R R

ASSETS

Noncurrent assets

Property $26000002360000$

Current assets

Inventory $320000340000$

Trade debtors $1000000900000$

Total assets $39200003600000$

EQUITY

Share premium $20000002000000$

Retained Income $14000001000000$

LIABILITIES

Current liabilities

Bank overdraft $120000220000$

Trade creditors $400000380000$

Total Equity and Liabilities $39200003600000$

Statement of Comprehensive Income $($Income Statement$)$ as at $31$ December $2024$:

$20242023$

R R

Sales $36000003000000$

Less Cost of Sales $(2400000)(1600000)$

Gross Profit $12000001400000$

Less Expenditure $(300000)(240000)$

Profit before interest and tax $9000001160000$

Interest $(100000)(80000)$

Profit before tax $8000001080000$

Taxation $(240000)(320000)$

Net profit for the year $560000760000$

Note:

$1.50\%$ of sales and purchases $($cost of sales$)$ are on credit.

$2.$ Do not use average ratios.

$3.$ 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. $(5)$