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QUESTION 4 (20 Marks) Extracts of the financial statements of Prestige Limited for 2019 are given below. REQUIRED 4.1 Calculate the following ratios for 2019. Where applicable, round off answers to two decimal places. 4.1.1 Gross profit margin (2 marks) 4.1.2 Net profit margin (2 marks) 4.1.3 Return on equity (2 marks) 4.1.4 Dividends per share (2 marks) 4.1.5 Acid test ratio (2 marks) 4.1.6 Debt-equity ratio (2 marks) 4.1.7 Finance cost coverage (2 marks) 4.2 Comment on the following ratios: 2019 2018 4.2.1 Inventory turnover 7.5 times 9.5 times (2 marks) 4.2.2 Average collection period 40.50 days 26.35 days (2 marks) 4.2.3 Earnings per share 15.75 cents 20.50 cents (2 marks) INFORMATION PRESTIGE LIMITED EXTRACT OF STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 R Sales 4 000 000 Cost of sales 2 700 000 Earnings before interest and taxes 500 000 Interest expense 45 000 Profit before tax 450 000 Profit after tax 315 000 EXTRACT OF STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019 R Non-current assets 2 500 000 Current assets 1 000 000 Equity 2 700 000 Non-current liabilities 450 000 Current liabilities 350 000 Note: 1. Inventories on 31 December 2019 amounted to R360 000. 2. The issued share capital of Prestige Limited consisted of 2 000 000 ordinary shares. 3. Total dividends for the year ended 31 December 2019 amounted to R225 000. 4. Credit terms to debtors are 30 days.

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