You are provided with the Financial Statements of Commercial Hospitality Traders for the year ended 30 June 2017. Analyse the statements and provide advice to the owners. Commercial Hospitality Traders Income Statement For the year ended 30 June 2017 $ $ $ Sales 178,000 Less Cost of Goods Sold 95,000 83,000 Less Inventory adjustment 230 Gross Profit 82,770 Add other revenue Rent Received 15,600 Gain on disposal of furniture 290 98,660 Less Other Operating Expenses SELLING AND DISTRIBUTION Advertising 2,600 Sales commission expense 1,340 Sales salaries 26,000 Delivery expenses 1,240 Depreciation - delivery vehicles 3,200 Depreciation - shop fittings 1,520 35,900 GENERAL AND ADMINISTRATIVE Rates 1,200 Wages 17,420 Insurance 1,400 Telephone 3,650 Electricity 3,560 Donations 2,650 29,880 FINANCE EXPENSES Bad Debts 550 Bank Charges 310 Provision for Doubtful Debts 650 1,510 67,290 Net Profit/Loss 31,370 Commercial Hospitality Traders Balance Sheet as at 30 June 2017 $ $ $ Current Assets Petty Cash 260 Bank 6,230 Inventory Control 26,000 Accounts Receivable Control 34,870 Less Provision for doubtful debts 890 33,980 GST Clearing 2,000 68,470 Less Current Liabilities Accounts Payable Control 32,000 32,000 WORKING CAPITAL 36,470 Add Non Current Assets PROPERTY PLANT AND EQUIPMENT Land and Buildings 350,000 Delivery Vehicles 48,000 Less Accumulated Depreciation - delivery vehicles 13,500 34,500 Shop Fittings 45,000 Less Accumulated Depreciation - Shop Fittings 16,900 28,100 INVESTMENTS Shares in XYZ Ltd 5,000 417,600 Less: Non-current liabilities Mortgage on land 120,000 Bank Loan 15,000 135,000 NET ASSETS 319,070 REPRESENTED BY: Owner's Equity Capital 300,300 Add net profit 31,370 331,670 Less Drawings 12,600 Total Owners Equity 319,070 USE FORMULA PROVIDED IN EXERCISE 1 AND EXERCISE 2 ABOVE WHEN CALCULATING RATIOS Calculate the gross profit percentage for 2017. Calculate the net profit percentage for 2017. Comment on the profitability of Commercial Hospitality Traders and provide 1 suggestion to Commercial Hospitality Traders to help them increase their profitability Calculate the current ratio for 2017. Calculate the acid test ratio for 2017. Do you think that the business will experience liquidity problems in the near future? Explain briefly. Calculate the Equity Ratio Comment on the results of the Equity ratio. Calculate the Debt Ratio for 2017. Interpret the debt ratio and comment on Commercial Hospitality Traders financial stability.
You are provided with the Financial Statements of Commercial Hospitality Traders for the year ended 30 June 2017. Analyse the statements and provide advice to the owners.
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Commercial Hospitality Traders |
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Income Statement |
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For the year ended 30 June 2017 |
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$ |
$ |
$ |
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Sales |
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178,000 |
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Less Cost of Goods Sold |
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95,000 |
83,000 |
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Less Inventory adjustment |
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230 |
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Gross Profit |
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82,770 |
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Add other revenue |
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Rent Received |
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15,600 |
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Gain on disposal of furniture |
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290 |
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98,660 |
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Less Other Operating Expenses |
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SELLING AND DISTRIBUTION |
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Advertising |
2,600 |
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Sales commission expense |
1,340 |
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Sales salaries |
26,000 |
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Delivery expenses |
1,240 |
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3,200 |
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Depreciation - shop fittings |
1,520 |
35,900 |
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GENERAL AND ADMINISTRATIVE |
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Rates |
1,200 |
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Wages |
17,420 |
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Insurance |
1,400 |
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Telephone |
3,650 |
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Electricity |
3,560 |
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Donations |
2,650 |
29,880 |
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FINANCE EXPENSES |
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550 |
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Bank Charges |
310 |
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Provision for Doubtful Debts |
650 |
1,510 |
67,290 |
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Net |
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31,370 |
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Commercial Hospitality Traders |
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as at 30 June 2017 |
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$ |
$ |
$ |
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Current Assets |
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Petty Cash |
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260 |
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Bank |
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6,230 |
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Inventory Control |
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26,000 |
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34,870 |
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Less Provision for doubtful debts |
890 |
33,980 |
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GST Clearing |
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2,000 |
68,470 |
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Less Current Liabilities |
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Accounts Payable Control |
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32,000 |
32,000 |
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36,470 |
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Add Non Current Assets |
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PROPERTY PLANT AND EQUIPMENT |
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Land and Buildings |
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350,000 |
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Delivery Vehicles |
48,000 |
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Less |
13,500 |
34,500 |
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Shop Fittings |
45,000 |
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Less Accumulated Depreciation - Shop Fittings |
16,900 |
28,100 |
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INVESTMENTS |
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Shares in XYZ Ltd |
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5,000 |
417,600 |
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Less: Non-current liabilities |
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Mortgage on land |
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120,000 |
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Bank Loan |
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15,000 |
135,000 |
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NET ASSETS |
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319,070 |
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REPRESENTED BY: |
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Owner's Equity |
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Capital |
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300,300 |
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Add net profit |
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31,370 |
331,670 |
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Less Drawings |
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12,600 |
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Total Owners Equity |
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319,070 |
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USE FORMULA PROVIDED IN EXERCISE 1 AND EXERCISE 2 ABOVE WHEN CALCULATING RATIOS
- Calculate the gross profit percentage for 2017.
- Calculate the net profit percentage for 2017.
- Comment on the profitability of Commercial Hospitality Traders and provide 1 suggestion to Commercial Hospitality Traders to help them increase their profitability
- Calculate the
current ratio for 2017. - Calculate the acid test ratio for 2017.
- Do you think that the business will experience liquidity problems in the near future? Explain briefly.
- Calculate the Equity Ratio
- Comment on the results of the Equity ratio.
- Calculate the Debt Ratio for 2017.
- Interpret the debt ratio and comment on Commercial Hospitality Traders financial stability.
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