Read the scenario below and a nswer the questions that follow:
Sail Along (Pty) Ltd is a small sailing boat and equipment manufacturer. It al.) has its own retail outlet and supplies to other shops. It is based in the Eastem Cape and, due to the extent of open water lakes in the area, has always run a successful business.
Over the past few years, the community has become more health conscious and interest in outdoor sporting activities has increased. Many foreigners spend their summers here and partake in water sports.
The company is funded by debt and equity. Two years ago, it had a R150 000 cash injection from shareholdersto reduce its debt levels. This was to help the company through the pandemic.
At around the same time, the company launched an online purchase option, which has been very successful.
Sail Along developed a unique kite surfer that is able to lift a surfer out of the water at least 10 metres. Manufacturing commenced in mid-2020 and the company is experiencing good demand through online sales.
see the attached photos and then answer the following
Required:
You have been asked to prepare a report on the company's liquidity, efficiency and solvency for the year. Refer to the note overleaf and complete the following questions:
a. Calculate the ratios (a) to (g) for 2021 in the table above. Note that the 2020 ratios are given.
b. Analyse the ratios by providing possible causes for and effects of the improvement or deterioration thereof from 2020 to 2021.
c. Provide two possible ways to improve the financial ratios. Consider the specifics of the scenario when providing your answers.
Extracted text: Retained income 466 000 389 000 294 000 Non-current liabilities 265 000 249 000 340 000 Long-term loan 265 000 249 000 340 000 Current liabilities Accounts payable TOTAL EQUITY AND LIABILITIES 180 000 160 000 160 000 1 044 000 285 000 285 000 180 000 1416 000 1 218 000 Additional information: 1. 70% of sales are on credit. All purchases are on credit. There are 365 days in a year. 2. 3. Ratio summary 2021 2020 a. Current ratio b. Acid-test ratio c. Debtors' collection period d. Stock days on hand e. Creditors' payment period f. Interest cover 2.77 :1 1.53 :1 46 Days 60 Days 46.34 Days 13.05 Times g. Total-debt ratio 35%
Extracted text: Below are the financial statements for the year ended 31 December 2021 and 2020. Sail Along (Pty) Limited Statement of profit or loss and comprehensive for the year ended 31 December 2021 2021 2020 Revenue 3 250 000 2 660 000 Cost of sales (1 570 000) (1 325 000) Gross profit 1 680 000 (1 190 000) 1 335 000 (1 010 000) Other costs Earnings before interest and tax 490 000 325 000 Interest expense (26 500) (24 900) Profit before taxation 463 500 300 100 Тахation (129 780) (84 028) Profit for the year 333 720 216 072 Sail Along (Pty) Limited Statement of financial position as at 31 December 2021 2021 2020 2019 ASSETS Non-current assets Property, plant, equipment 802 000 720 000 600 000 802 000 720 000 600 000 Current assets 614 000 498 000 444 000 Inventory 270 000 223 000 209 000 Accounts receivable 340 000 255 000 210 000 Cash & cash equivalents 4 000 20 000 25 000 TOTAL ASSETS 1416 000 1218 000 1 044 000 EQUITY AND LIABILITIES Equity and reserves 866 000 789 000 544 000 Share capital 400 000 400 000 250 000