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1. Calculate the profitability and efficiency ratios for 2021 and 2020.

2. Compare the financial ratios between 2020 and 2021. Explain the changes in each profitability and efficiency ratio (the meaning of the changes and the reason for the changes).
3. Provide a conclusion on the overall profitability and efficiency of the company.

Financial Ratios	Formula
Return on assets (ROA)	= Profit / Total assets x 100%
Return on equity (ROE)	= Profit / Average owners equity x 100%
Profit margin	= Profit / Sales x 100%
Gross profit margin	= (Sales - cost of sales) / sales x 100%
Inventory turnover	= Cost of Sales / Average inventory
Debtors turnover	= Sales / Average accounts receivable

High-Tex Limited
Income Statement for the year ending 30 June
	2021 ($000)	2020 ($000)
Revenue - computer	9,400	8,250
Revenue - software	1,430	1,550
Total operating revenue	10,830	9,800
Cost of sales	5,310	5,185
Gross profit	5,520	4,615
Administration expense	1,250	950
Wage expense	650	510
Depreciation expense	225	225
Other expenses	480	435
Earnings before interest and tax	2,915	2,495
Interest expense	455	525
Profit before tax	2,460	1,970
Income tax expense	738	591
Profit for the period from continuing operations	1,722	1,379

High-Tex Limited
Balance Sheet as at 30 June
	2021 ($000)	2020 ($000)
Current assets
Cash	1,450	2155
Accounts receivable	1455	1,045
Inventories	755	980
Total current assets	3,660	4,180
Non-current assets
Property, plant and equipment	6,780	7,150
Intangible assets	550	451
Total non-current assets	7,330	7,601
Total assets	10,990	11,781
Current liabilities
Accounts payable	735	1145
Income tax payable	650	685
Accrued expenses	815	995
Total current liabilities	2,200	2,825
Non-current liabilities
Bank loans	3,700	4,100
Provisions	585	415
Total non-current liabilities	4,285	4,515
Total liabilities	6,485	7,340
Net assets	4,505	4,441
Equity
Share capital	2,000	2,000
Retained earnings	2,505	2,441
Total Equity	4,505	4,441

Additional information:

The total equity as at 30 June 2019 is $4,185,000.

The inventory as at 30 June 2019 is $915,000.

The accounts receivable as at 30 June 2019 is $1,055,000.

Calculate the following efficiency ratios (Keep 2 decimal places, 2 Marks):

Financial Ratios	2021	2020	Increase/Decrease
Inventory turnover
Debtors turnover

Discuss the changes in inventory turnover (0.5 mark).

Discuss the changes in debtors turnover (0.5 mark):

Provide an overall discussion on the efficiency of the company (based on both efficiency ratios) (0.5 mark):

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