The summarised accounts of Hope (Eternal Springs) Ltd for the years 2011 and 2012 are given below.

Required:

(a) Calculate the following ratios for 2011 and 2012: (i) Gross profit: Sales (ii) Inventory 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.

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Sales Less Cost of sales Gross profit Less Administration expenses Loan note interest Net profit Income Statements for the years ending 31 December 2011 Total assets Current liabilities Accounts payable Bank Non-current assets at cost less depreciation Current assets Inventory Accounts receivable Bank Non-current liabilities 8% loan notes Total liabilities Net assets 000 Equity Ordinary share capital Retained profits Total equity Inventory at 1 January 2011 was 50,000. 38 A Statements of Financial Position as at 31 December 2011 000 20 25 = 15 10 25 000 200 (150) 50 1 (38) 12 000 110 45 155 (25) 130 100 30 130 000 46 LA 4 000 30 28 5 12 2012 50 2012 000 280 (210) 70 (50) 20 000 140 63 203 (62) 141 100 41 141