Total: 25 marks] Question Four (a) Mambo Ltd's Comparative financial statements are given below: Statement of Financial position as at December 31, 2016 2015 2014 Shs. Shs. Shs. Cash 308,000 356,250 368,000 Accounts receivable, net 885,000 625,000 492,000 Inventory 1,115,000 825,000 530,000 Prepaid expenses 97,000 93,750 40,000 Plant assets net 2.775.000 2.550.000 2.295.000 Total assets 5.180.000 4.450.000 3.725.000 Accounts payable Notes payable, secured by plant assets Ord. Shares, Shs. 10 par Retained earnings Total liability and equity 1,289,000 752,500 975,000 1,025,000 1,625,000 1,625,000 1.291.000 1.047.500 5.180.000 4.450.000 492,500 825,000 1,625,000 282.500 3.725.000 Shs. Income statement for the year Ended December 31, 2016 2015 Shs. Sales 6,725,000 5,300,000 Cost of goods sold 4.102.250 3.445.000 Gross profit 2,622,750 1,855,000 Other operating expenses 2.085,500 1,339.800 Operating income 537,250 515,200 Interest expense 111,000 123,000 Income before tax 426,250 392,200 Income tax 85.250 78.450 Net income 341.000 313.750 EPS 2.10 1.93 Required: Evaluate Mambo Ltd's efficiency and profitability for the years 2015 and 2016 based on the relevant ratios. [15 marks] [5 marks] (b) Explain the key objectives of ratio analysis. (c) Explain the possible shortcomings of ratio analysis. [5 marks] [Total: 25 marks] Page 5 of 5