Onyango Scott is a trade supplier who has been approached by BIB Builders who are requesting credit terms for the first time. Their managing director has provided Onyango with the following extracts from the final accounts for the past two years and Onyango has approached you for advice. 2019 sh. 2020 sh. Sales turnover 600,000 650,000 Opening stock 268,000 148,000 Closing stock 148,000 126,000 Purchases 225,000 268,000 Operating expenses 190,000 250,000 Ordinary share capital 300,000 300,000 Long term loan 40,000 70,000 Retained earnings 175,000 240,000 Bank (30,000) 15,000 Debtors 28,000 48,000 Creditors 85,000 90,000 a) Calculate the following ratios for both years: i) Gross profit margin ii) Net profit (operating) margin iii) Return on capital employed iv) Current ratio v) Debtor days vi) Gearing ratio vii) Stock Turnover rate viii) Quick asset ratio b). Comment on short term solvency status of the firm
Onyango Scott is a trade supplier who has been approached by BIB Builders who are requesting credit terms for the first time.
Their managing director has provided Onyango with the following extracts from the
2019 sh. 2020 sh.
Sales turnover 600,000 650,000
Opening stock 268,000 148,000
Closing stock 148,000 126,000
Purchases 225,000 268,000
Operating expenses 190,000 250,000
Ordinary share capital 300,000 300,000
Long term loan 40,000 70,000
Bank (30,000) 15,000
Debtors 28,000 48,000
Creditors 85,000 90,000
a) Calculate the following ratios for both years:
i) Gross profit margin
ii) Net profit (operating) margin
iii) Return on capital employed
iv) Current ratio
v) Debtor days
vi) Gearing ratio
vii) Stock Turnover rate
viii) Quick asset ratio
b). Comment on short term solvency status of the firm
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