The following statement of financial position was prepared for the business owned by Jack Hall at the
Question:
The following statement of financial position was prepared for the business owned by Jack Hall at the end of its financial year. The business had credit sales of $224,000 and credit purchases of $154,000 for the year ended 31 December 2014.
Calculate the following ratios:
a. Current ratio
b. Liquid (acid test) ratio
c. Return on capital employed
d. Trade receivables turnover
e. Trade payables turnover.
In each case, state the formula used.
Transcribed Image Text:
Cost Depreciation Net book value Non-current assets 490 000 198 000 294 000 Current assets Inventory 17 000 Trade receivables 16 000 Other receivables 1 000 Cash and cash 2 000 36 000 equivalents Total assets 330 000 Capital Opening balance 298 000 Profit for the year 45 000 343 000 Drawings (37 000) 306 000 Current liabilities Bank loan 7 000 Trade payables 14 000 Other payables 3 000 24 000 Total capital and liabilities 330 000 %24 %24
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ANSWER a Current ratio The current ratio measures a companys ability to meet its shortterm obligations It is calculated by dividing current assets by current liabilities Current ratio Current assets C...View the full answer
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Related Book For
Accounting For Cambridge International AS And A Level
ISBN: 9780198399711
1st Edition
Authors: Jacqueline Halls Bryan, Peter Hailstone
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