Excerpts of the financial data of Sapphire Ltd for 2022 are as follows: STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 R Sales Cost of sales Operating profit Interest expense Profit before tax Company tax STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 Assets Non-current assets Inventories Accounts receivable Cash Equity and liabilities Ordinary share capital (704 000 shares) Retained earnings Long-term loan (12% p.a.) Accounts payable Dividends payable (for 2022) 7 800 000 5 280 000 796 800 105 600 691 200 207 360 R 2 352 000 3 120 000 931 200 9 600 6 412 800 1 689 600 1 382 400 888 000 2 092 800 360 000 6 412 800 1. 2. Additional information All purchases and sales of inventories were on credit. Inventories on 31 December 2021 amounted to R2 880 000. 3. The following ratios were calculated for 2022 and 2021: 2022 2021 Profit margin 6.20% 13.63% Return on equity 15.75% 21.85% 4. The market prices of the company's shares for 2022 and 2021 were R4.00 and R3.50 respectively.

Chapter 24 discusses various methods of analyzing financial statements in terms of calculating ratios. Specifically, Return on Assets (ROA) is a very simple calculation: ROA= Net Income/Average Total Assets.  Another method at arriving at this ratio is the DuPont Equation that was discussed in your textbook.  In looking at the DuPont Equation, what benefits are derived by using this method rather than the most typical method that I have described above?

Which of the following ratios is used to analyze a company's liquidity? a. Inventory turnover ratio b. Earnings per share c. Return on assets ratio d. Asset turnover ratio

Q3-1 What are the five groups of financial ratios? Give two or three examples of each kind. Q3-2 Explain the kind of information the following financial ratios provide about a firm? A. Quick ratio B. Cash ratio C. Total asset turnover D. Equity multiplier E. Time interest earned ratio F. Profit margin G. Return on assets H. Return on equity 1. Price / earnings ratio

Using the information from 27A prepare the following ratios: gross profit margin profit margin return on assets earnings per share current ratio acid test ratio debt ratio Indicate what each is used for (ie: measuring efficiency, solvency etc)

4. According to the basic DuPont equation, a firm's ROE is the product of what other two ratios? a. net profit margin and the equity multiplier b. ROA and the equity multiplier C. net profit margin and return on equity d. net profit margin and total asset turnover

Indicate whether the following are a measure of (a) liquidity, (b) profitability, or (c) leverage. 1. Quick ratio   2. Times interest earned ratio   3. Current ratio   4. Ratio of net sales to assets   5. Return on total assets   6. Accounts receivable turnover   7. Return on stockholders' equity   8. Book value per share of common stock   9. Ratio of liabilities to stockholders' equity   10. Acid-test ratio   11. Earnings per share of common stock   12. Merchandise inventory turnover   13. Working capital

1. Which of the following is referred to as the Accounting Equation? Assets Liabilities + Equity Equity Liabilities + Assets Liabilities Assets + Equity Assets = Liabilities - Equity = 2. Which of the following make up the Finance Equation? (select all that apply) Revenues = Price x Volume Costs = Fixed + Variable Profit Revenues-Costs Income Sales - COGS

Identify two ratios to use to analyze a firm’s liquidity position, andwrite out their equations.

5. Know the calculations for all of the following ratios (see ratio sheet that can be used on the exam) and know the category (listed in Question 4) they fall in: Formula Category/Use Ratio Working Capital Current Assets - Current Liabilities Net credit sales/Average Accounts Receivable Turnover accounts receivable Asset Turnover Net sales/Average total assets Net income/Average total stockholders' equity Total liabilities/Total stockholders equity Net income/Net sales Return on Equity (ROE) Debt to equity Return on Sales (ROS) (also known as Net Margin Current Assets/Current Liabilities Cost of goods sold/Average inventory Quick assets/Current Current Ratio Inventory Turnover Quick Ratio liabilities Dividend Yield Dividends per share/Market price per share Net earnings available for common stock/Number of outstanding common shares Net income/Average total Earnings per Share (EPS) Return on Investment (ROI) assets Price Earnings Ratio (P/E) Market price per share/Earnings per share…