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Ratio Question - SA

Ratio analysis questions

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Tarannum Tasneem
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17 views

Ratio Question - SA

Ratio analysis questions

Uploaded by

Tarannum Tasneem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Ratio Question

Shajedul Alam
Senior Lecturer
USB
You are to study the following financial statements for two furniture stores and then answer the questions
which follow.

Financial Statements

X Y
Tk. Tk. Tk. Tk.
Profit and loss accounts
Sales 555,000 750,000
Less Cost of goods sold
Opening stock 100,000 80,000
Add Purchases 200,000 320,000
300,000 400,000
Less Closing stock ( 60,000) (240,000) ( 70,000) (330,000)
Gross profit 315,000 420,000
Less Depreciation 5,000 15,000
Wages, salaries and commission 165,000 220,000
Other expenses 45,000 (215,000) 35,000 (270,000)
Net profit 100,000 150,000
Balance sheets
Fixed assets
Equipment at cost 50,000 100,000
Less Depreciation to date ( 40,000) 10,000 ( 30,000) 70,000
Current assets
Stock 60,000 70,000
Debtors 125,000 100,000
Bank 25,000 12,500
210,000 182,500
Less Current liabilities
Creditors (104,000) 106,000 (100,500) 82,000
116,000 152,000

Financed by:
Capitals
Balance at start of year 76,000 72,000
Add Net profit 100,000 150,000
176,000 222,000
Less Drawings ( 60,000) ( 70,000)
116,000 152,000

Required:
(a) Calculate the following ratios for each business:
(i ) gross profit as percentage of sales; (vi ) current ratio;
(ii ) net profit as percentage of sales; (vii ) acid test ratio;
(iii ) expenses as percentage of sales; (viii ) debtor/sales ratio;
(iv) stock turnover; (ix) creditor/purchases ratio.
(v) rate of return of net profit on capital
employed (use the average of the capital
account for this purpose);
(b) Drawing upon all your knowledge of accounting, comment upon the differences and similar-
ities of the accounting ratios for A and B. Which business seems to be the most efficient? Give
possible reasons. ‘

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