The chief executive officer of Sparkrite Ltd, a trading business, has just received summary sets of financial statements for last year and this year:

Required:

(a) Show, by using the data given, how you would calculate ratios that could be used to measure inventories and trade receivables levels during last year and this year.

(b) Discuss the ways in which the management of Sparkrite Ltd could exercise control over the levels of:
(i) inventories (ii) trade receivables.

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Sales revenue Cost of sales Income statements for years ended 30 September Last year Opening inventories Purchases Closing inventories Gross profit Expenses Profit for the year 000 160 1,120 1,280 (200) 000 1,800 (1,080) 720 (680) 40 This year 000 200 1,175 1,375 (250) 000 1,920 (1,125) 795 (750) 45