question archive The following details concern the business of A
The following details concern the business of A
Subject:AccountingPrice: Bought3
The following details concern the business of A.Andreza, who is worried about the profitability and financial structure of her business at 31 March 2016, especially since the bank is requiring repayment of her overdraft.31 March 2015$31 March 2016$Sales (credit)60,00090,000Cost of sales39,00063,000All other expenses12,00021,000Cash at bank12,000(18,000)Inventory18,00033,000Accounts receivable (net)12,00030,000Non-current assets (net)24,00048,000Accounts payable6,0009,000A.Andreza, capital(The balance as at 1 April 2014 was $56,000)60,00072,000Non-current liabilities-12,000Inventory at 1 April 2014 was $15,000Accounts receivable at 1 April 2014 were $10,000Accounts payable at 1 April 2014 were $5,000Required:(a) Calculate the following ratios for 2015 and 2016 [round to one decimal place]:i. Gross profit margin.ii. Operating profit margin.iii. Rate of return on owners’ equity.iv. Current ratio.v. Acid test ratio.vi. Gearing ratio.vii. Accounts receivable turnover period.viii. Accounts payable turnover period [assume all purchases on credit].ix. Inventory turnover period.(b) Write a short report to the owner. In your report you should:i. Analyse profitability of the business and provide recommendations to Andreza.ii. Analyse financial stability of the business and provide recommendationsto Andreza.iii. Analyse asset Utilization in the business and provide recommendations toAndreza.
