The following information is given for the business of Selena Chulk: Trading account for the year ended
Question:
The following information is given for the business of Selena Chulk:
Trading account for the year ended 31 July 20*8
Balance sheet at 31 August 20*8
Additional information
80% of total sales were on credit.
75% of total purchases were on credit.
The gross margin for the year ended 31 August 20*7 was 48.63%.
The net margin for the year ended 31 August 20*7 was 14.77%.
The rate of stock turnover for the year ended 31 August 20*7 was 10.4 times.
The debtors’ collection period at 31 August 20*7 was 22 days.
The creditors’ payment period at 31 August 20*7 was 45 days.
Required
Calculate the following ratios:
a) Gross margin
b) Net profit margin
c) Overheads in relation to turnover ratio
d) Return on capital employed
e) Rate of stock turnover
f) Net current assets ratio
g) Liquid capital ratio
h) Debtors’ collection period
i) Creditors’ payment period.
Comment on the results revealed by the gross margin; the net margin; the rate of stock turnover; the debtors’ collection period; and the creditors’ payment period.
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