The financial statements for Over and Out Ltd for the year ended 31 December 2014 were as follows.

Additional information:

• Dividends paid during the year: $12,000

• Retained earnings at 1 January 2014: $42,000.

a. Use the financial statements tor Over and Out Ltd to calculate the following profitability and financial rates: 

i. Gross profit merge

ii. Profit margin (using operating profit) 

iii. Return on capital employed iv current ratio 

v. liquid (acid test) ratio vi rate of inventory turnover (using the closing inventory as the average inventory). 

b. Explain briefly what each of the ratios tells you about the financial results of Over and Out Ltd for the year ended 31 December 2014.

Transcribed Image Text:

Over and Out Ltd Income statement for the year ended 31 December 2014 2$ Revenue 180 000 Cost of sales (71 500) Gross profit 108 500