The trading inventory of Joan Street, retailer, has been reduced during the year ending 31 March 2011 by £6,000 from its commencing figure of £21,000. A number of financial ratios and related statistics have been compiled relating to the business of Joan Street for the year ending 31 March 2011. These are shown below alongside comparative figures for a number of retailers who are members of the trade association to which Joan Street belongs:

Joan Street has supplied all the capital for her business and has had no drawings from the business during the year ending 31 March 2011. Required:

(a) Prepare the income statement for the year ending 31 March 2011 and statement of financial position as at that date of Joan Street in as much detail as possible.

(b) Identify two aspects of Joan Street’s results for the year ending 31 March 2011 which compare favourably with the trade association’s figures and identify two aspects which compare unfavourably.

(c) Outline two drawbacks of the type of comparison used in this question.

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Net profit as % net capital employed (Authors' Note) Net profit Sales Sales Net capital employed Non-current assets Sales Working capital ratio: Current assets Current liabilities Acid test ratio: Bank + Accounts receivable Current liabilities Gross profit Sales Accounts receivable collection period: Accounts receivable x 365 Sales Inventory turnover (based on average inventory for the year) Joan Street % 15 9 166 45 400 275 25 36 days 10 times Trade association % 16 8 200 35 287/2 187 26 3220 days 8 times