Study the information provided below and answer the following questions. Where applicable, express the answers to ratios to two decimal places.

It is the policy of Libra Ltd to retain 40% of the profit after tax. Was this policy adhered to for the financial year ended 31 December 2020? Motivate your answer.

1.1 (5 marks) Has management been efficient in the management of its accounts receivable? Use the relevant ratio to motivate your answer.

1.2 (4 marks) Did Libra Ltd take advantage of the credit terms offered by its trade creditors? Substantiate your answer.

1.3 (4 marks) 1.4 Would the shareholders of Libra Ltd be satisfied with their return on investment? Why? (4 marks) Suppose Libra Ltd purchases goods for R600 000. How much should it sell the goods for and still maintain the existing gross margin ratio?

1.5 (4 marks) Comment on the ability of the company to generate profits from all the capital it has employed. Support your answer with a suitable ratio. (4 marks)

INFORMATION

Libra Ltd commenced operations during January 2015. The company experienced profitability since the first year of existence and was able to pay out dividends to the shareholders over the years and retain some of the profit. The following are excerpts of the financial statements of Libra Ltd for 2020: