2.1 Use the information provided below to calculate the ratios for 2022 (expressed to two decimal places) that would reflect each of the following: 2.1.1 The profit of the company relative to sales after deducting the cost of sales. 2.1.2 The ability of the company to profitably utilize its capital, which includes both debt and equity. 2.1.3 The proportion of the total assets that are financed by total debt. 2.1.4 The ability of the company to repay its short-term debts under distress conditions, on the assumption that inventories would have no value at all. 2.1.5 The portion of the company's profit that is allocated to each outstanding ordinary share. 2.1.6 An indication of the percentage of profit that has been put back into the company. 2.2 Comment on the following ratios that have been calculated for Zorro Ltd: 2.2.1 Profit margin 2.2.2 Return on equity INFORMATION Excerpts of the financial data of Zorro Ltd for 2022 are as follows: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 Sales Cost of sales Operating profit Interest expense Profit before tax Company tax STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 Additional information Assets Non-current assets Inventories Accounts receivable Cash Equity and abilities Ordinary share capital (704 000 shares) Retained eamings Long-term loan (12% pa) Accounts payable Dividends payable (for 2022) 1. 2. All purchases and sales of inventories were on credit. Inventories on 31 December 2021 amounted to R2 880 000. 3. The following ratios were calculated for 2022 and 2021: 4. Profit margin Return on equity R 7 800 000 5280 000 796 800 105 600 691 200 R 207 360 2352 000 3120 000 931 200 9600 6412800 1680 600 1382400 888000 2002 800 360 000 6412 800 2022 2021 6.20% 13.63% 15.75% 21.85% The market prices of the company's shares for 2022 and 2021 were R4.00 and R3.50 respectively.
2.1 Use the information provided below to calculate the ratios for 2022 (expressed to two decimal places) that would reflect each of the following: 2.1.1 The profit of the company relative to sales after deducting the cost of sales. 2.1.2 The ability of the company to profitably utilize its capital, which includes both debt and equity. 2.1.3 The proportion of the total assets that are financed by total debt. 2.1.4 The ability of the company to repay its short-term debts under distress conditions, on the assumption that inventories would have no value at all. 2.1.5 The portion of the company's profit that is allocated to each outstanding ordinary share. 2.1.6 An indication of the percentage of profit that has been put back into the company. 2.2 Comment on the following ratios that have been calculated for Zorro Ltd: 2.2.1 Profit margin 2.2.2 Return on equity INFORMATION Excerpts of the financial data of Zorro Ltd for 2022 are as follows: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 Sales Cost of sales Operating profit Interest expense Profit before tax Company tax STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 Additional information Assets Non-current assets Inventories Accounts receivable Cash Equity and abilities Ordinary share capital (704 000 shares) Retained eamings Long-term loan (12% pa) Accounts payable Dividends payable (for 2022) 1. 2. All purchases and sales of inventories were on credit. Inventories on 31 December 2021 amounted to R2 880 000. 3. The following ratios were calculated for 2022 and 2021: 4. Profit margin Return on equity R 7 800 000 5280 000 796 800 105 600 691 200 R 207 360 2352 000 3120 000 931 200 9600 6412800 1680 600 1382400 888000 2002 800 360 000 6412 800 2022 2021 6.20% 13.63% 15.75% 21.85% The market prices of the company's shares for 2022 and 2021 were R4.00 and R3.50 respectively.
Chapter5: Evaluating Operating And Financial Performance
Section: Chapter Questions
Problem 2EP
Related questions
Question
Transcribed Image Text:2.1 Use the information provided below to calculate the ratios for 2022 (expressed to two decimal places) that would reflect each of the
following:
2.1.1 The profit of the company relative to sales after deducting the cost of sales.
2.1.2 The ability of the company to profitably utilize its capital, which includes both debt and equity.
2.1.3 The proportion of the total assets that are financed by total debt.
2.1.4 The ability of the company to repay its short-term debts under distress conditions, on the assumption that inventories would
have no value at all.
2.1.5 The portion of the company's profit that is allocated to each outstanding ordinary share.
2.1.6 An indication of the percentage of profit that has been put back into the company.
2.2 Comment on the following ratios that have been calculated for Zorro Ltd:
2.2.1 Profit margin
2.2.2 Return on equity
INFORMATION
Excerpts of the financial data of Zorro Ltd for 2022 are as follows:
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022
Sales
Cost of sales
Operating profit
Interest expense
Profit before tax
Company tax
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022
Additional information
Assets
Non-current assets
Inventories
Accounts receivable
Cash
Equity and abilities
Ordinary share capital (704 000 shares)
Retained eamings
Long-term loan (12% pa)
Accounts payable
Dividends payable (for 2022)
1.
2.
All purchases and sales of inventories were on credit.
Inventories on 31 December 2021 amounted to R2 880 000.
3. The following ratios were calculated for 2022 and 2021:
4.
Profit margin
Return on equity
R
7 800 000
5280 000
796 800
105 600
691 200
R
207 360
2352 000
3120 000
931 200
9600
6412800
1680 600
1382400
888000
2002 800
360 000
6412 800
2022
2021
6.20%
13.63%
15.75%
21.85%
The market prices of the company's shares for 2022 and 2021 were R4.00 and R3.50 respectively.
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