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QUESTION $4$

$(20$ Marks$)$

REQUIRED

Use the information provided below to answer the following questions.

$4\mathrm{.}1$ Calculate the following ratios for $2023$ only. Note: Use the formulas provided in the formula sheet only $($that appear after QUESTION $5).$ Answers to the ratios must be expressed to two decimal places.

$4\mathrm{.}1\mathrm{.}1$ Inventory turnover

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}2$ Net profit margin

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}3$ Debt$-$equity

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}4$ Earnings per share

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}5$ Finance cost coverage

$(2$ marks$)$

$4\mathrm{.}1\mathrm{.}6$ Average collection period

$(2$ marks$)$

$4\mathrm{.}2$ Will the company be able to pay its short$-$term debts if business conditions are unfavourable? Motivate your answer by using an appropriate ratio.

$(4$ marks$)$

$4\mathrm{.}3$ Will the shareholders of the company be satisfied with the return on their investments? Support your answer with the use of an appropriate ratio.

$(4$ marks$)$

INFORMATION

The extracts of the financial statements of Fabrice Limited for $2022$ and $2023$ are provided below.

$\backslash$table$[[$FABRICE LIMITED,$],[$STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED $31$ DECEMBER $2023,],[,$R$],[$Sales$,990000],[$Cost of sales,$600000],[$Earnings before interest and taxes,$250000],[$Interest expense,$30000],[$Profit before tax,$220000],[$Company tax,$59400]]$

$\backslash$table$[[$STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER:,,$],[,2023($R$),2022($R$)],[$Non$-$current assets,$1368000,1140000],[$Inventories$,360000,220000],[$Accounts receivable,$180000,250000],[$Cash and cash equivalents,$12000,10000],[$Bank overdraft,$50000,40000],[$Ordinary share capital,$1000000,800000],[$Retained earnings,$430000,220000],[$Non$-$current liabilities,$240000,410000],[$Accounts payable,$200000,150000]]$

Additional information

All purchases and sales of inventories are on credit.

The number of ordinary shares in issue during $2023$ was $500000.$

Shareholders earned a return of $9\mathrm{.}71\%$ on their investments during $2022.$

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