Smart Sports Ltd has been approached by Running Fast Ltd, who run a small chain of sports stores in the London area, to supply them on a monthly basis with team kits.
The business has had a number of defaults on payments by small retailers, and Sam is keen to establish the viability of Running Fast Ltd, who wish to buy on 30 days’ credit.
He has obtained copies of their most recent accounts, and summaries of the income statement and statement of financial position are given in Tables 8.5 and 8.6.

Compute and interpret the following ratios for 2015 and 2014, and prepare a list of points and questions that Sam may wish to raise during his discussions with Running Fast Ltd.
1. Current ratio.
2.Acid test ratio.
3.Inventory days.
4. Trade receivable days (10% of sales are on credit).
5.Trade payable days (all purchases are on credit).

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Table 8.5 Running Fast Ltd Summarized income statements for the years ended 30 September 2015 2014 '000 '000 '000 '000 388 360 Sales Cost of sales Opening inventories 40 20 Purchases 310 300 Closing inventories 47 40 303 280 Gross profit Expenses (including interest) Profit for the year 85 80 72 70 13 10