41.11A Study the following financial statements of two companies and then answer the questions -> which follow. Both companies are wholesalers of household products. The values shown are in £000s. Buscema Ltd Abraxas Ltd £000 £000 £000 £000 3,300 2,700 Income Statements Sales 216 Less Cost of goods sold Opening inventory Add Purchases Less Closing inventory 410 2,340 (460) 1,697 (233) (2,290) 1,010 (1,680) 1,020 Gross profit Less Expenses Wages and salaries Directors' remuneration Other expenses 712 85 569 175 168 147 (944) 66 (912) 108 Net profit Balance Sheets Non-current assets 474 210 Equipment at cost Less Depreciation to date (212) (52) 262 158 117 213 Vans (85) (55) Less Depreciation to date 128 62 390 220 Current assets 233 106 460 Inventory Accounts receivable Bank 524 8. 21 992 360 1,382 580 Total assets Less Current liabilities Accounts payable Net assets (744) 638 (179) 401 Equity Issued share capital Retained profits Total equity 260 378 80 321 638 401 equired: O Calculate the following ratios for both Abraxas Ltd and Buscema Ltd: () gross profit as percentage of sales; (ii) net profit as percentage of sales; (iii) expenses as percentage of sales; (iv) inventory turnover; (v) rate of return of net profit on capital employed (for the purpose of this question only, E capital as being total of share capitals + reserves at the date of the balance sheet); (vi) current ratio; (vii) acid test ratio; (vii) accounts receivable days; (ix) accounts payable days. Comment briefly on the performance of the two companies based on the ratios you have lated, suggesting possible reasons for your observations.
41.11A Study the following financial statements of two companies and then answer the questions -> which follow. Both companies are wholesalers of household products. The values shown are in £000s. Buscema Ltd Abraxas Ltd £000 £000 £000 £000 3,300 2,700 Income Statements Sales 216 Less Cost of goods sold Opening inventory Add Purchases Less Closing inventory 410 2,340 (460) 1,697 (233) (2,290) 1,010 (1,680) 1,020 Gross profit Less Expenses Wages and salaries Directors' remuneration Other expenses 712 85 569 175 168 147 (944) 66 (912) 108 Net profit Balance Sheets Non-current assets 474 210 Equipment at cost Less Depreciation to date (212) (52) 262 158 117 213 Vans (85) (55) Less Depreciation to date 128 62 390 220 Current assets 233 106 460 Inventory Accounts receivable Bank 524 8. 21 992 360 1,382 580 Total assets Less Current liabilities Accounts payable Net assets (744) 638 (179) 401 Equity Issued share capital Retained profits Total equity 260 378 80 321 638 401 equired: O Calculate the following ratios for both Abraxas Ltd and Buscema Ltd: () gross profit as percentage of sales; (ii) net profit as percentage of sales; (iii) expenses as percentage of sales; (iv) inventory turnover; (v) rate of return of net profit on capital employed (for the purpose of this question only, E capital as being total of share capitals + reserves at the date of the balance sheet); (vi) current ratio; (vii) acid test ratio; (vii) accounts receivable days; (ix) accounts payable days. Comment briefly on the performance of the two companies based on the ratios you have lated, suggesting possible reasons for your observations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question
Transcribed Image Text:Part 9
An introduction to
tr
which follow. Both companies are wholesalers of household products. The values shown are i questi
Buscema Ltd
->
Abraxas Ltd
£000
£000
£000
£000
Income Statements
Pre
3,300
2,700
Ger
Sales
or
Less Cost of goods sold
Opening inventory
Add Purchases
Less Closing inventory
410
216
89
2,340
1,697
(460)
(233)
El
(2,290)
1,010
(1,680)
1,020
Gross profit
Less Expenses
Wages and salaries
Directors' remuneration
712
569
85
175
Other expenses
147
168
(944)
Net profit
Balance Sheets
(912)
108
66
Non-current assets
Equipment at cost
Less Depreciation to date
474
210
(212)
(52)
262
158
Vans
213
117
Less Depreciation to date
(85)
(55)
128
62
390
220
Current assets
Inventory
Accounts receivable
460
233
524
106
Bank
8.
21
992
360
Total assets
1,382
580
Less Current liabilities
Accounts payable
Net assets
(744)
638
(179)
401
Equity
Issued share capital
Retained profits
Total equity
260
80
378
321
638
401
Required:
(a) Calculate the following ratios for both Abraxas Ltd and Buscema Ltd:
()
gross profit as percentage of sales;
(i)
net profit as percentage of sales;
(iii) expenses as percentage of sales;
(iv) inventory turnover;
(v)
rate of return of net profit on capital employed (for the purpose of this question only, take
capital as being total of share capitals + reserves at the date of the balance sheet);
(vi) current ratio%;
(vii) acid test ratio%;
(viii) accounts receivable days;
(ix) accounts payable days.
(b) Comment briefly on the performance of the two companies based on the ratios you have calcu-
lated, suggesting possible reasons for your observations.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education