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unit. The straight$-$line method of depreciation is used by Colatonic Ltd$.$ The company's cost of capital is $16\%.$

If approved, the implementation date would be $02$ January $2025.$

QUESTION $1$

$(25$ MARKS$)$

Study the Statement of Comprehensive Income of Colatonic Ltd for $2023$ and $2022$ and answer the following

questions:

$1\mathrm{.}1$ What evidence does the statement of comprehensive income for the year ended

$31$ December $2023$ provide for each of the following? $($Include calculations to support

your answer.$)$

$1\mathrm{.}1\mathrm{.}1$ Increase in investment of R$400000$

$(3$ marks$)$

$1\mathrm{.}1\mathrm{.}2$ Increase in the loan balance of R$400000$

$(3$ marks$)$

$1\mathrm{.}2$ If the return on capital employed of Colatonic Ltd is greater than the interest rate on the

loan how would this be interpreted by management?

$(3$ marks$)$

$1\mathrm{.}3$ Comment on the decrease in selling, general and administrative expenses.

$(2$ marks$)$

$1\mathrm{.}4$ Comment on the financial result of the company.

$(3$ marks$)$

$1\mathrm{.}5$ Suggest TWO $(2)$ ways in which the company can improve its net profit margin ratio.

$(2$ marks$)$

$1\mathrm{.}6$ What amounts would appear in the statement of cash flows for the year ended

$31$ December $2023$ in respect of the following? $($Show all calculations.$)$

$1\mathrm{.}6\mathrm{.}1$ Dividends paid

$(3$ marks$)$

$1\mathrm{.}6\mathrm{.}2$ Company tax paid

$(3$ marks$)$

$1\mathrm{.}6\mathrm{.}3$ Net change in cash and cash equivalents $($Also state if it is an increase or decrease.$)$

$(3$ marks$)$

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