The summarised accounts of Hope (Eternal Springs) Ltd for the years 20X8 and 20X9 are given below.

Stock at 1 January 20X8 was £50,000.

Required:

(a) Calculate the following ratios for 20X8 and 20X9:

(i) Gross profit: Sales

(ii) Stock turnover

(iii) Net profit: Sales

(iv) Quick (‘acid test’)

(v) Working capital

(vi) Net profit: Capital employed

(b) State the possible reasons for and significance of any changes in the ratios shown by your calculations.

Transcribed Image Text:

Trading and Profit and Loss Accounts for the year ended 31 December 20X8 Sales Less Cost of sales Gross profit Less Administration expenses Debenture interest Net profit £000 38 = £000 200 (150) 50 (38) 12 £000 46 4 20X9 £000 280 (210) 70 (50) 20