The following information relates to the business of Chef One, and the owner is concerned about the
Question:
The following information relates to the business of Chef One, and the owner is concerned about the profitability and financial structure of his business at 30 June 2017, especially since the bank is requiring repayment of the business’s overdraft.
30 June 2017 | 30 June 2016 | ||
Revenue (sales on credit) Cost of sales Other expenses Cash and cash equivalents | $140 000 99 500 36 500 (32 000) | $105 000 68 500 28 000 28 000 | |
Inventories Trade accounts receivable (net) Non-current assets (net) Trade accounts payable K. Pastry, Capital Non-current liabilities | 54 500 50 000 77 000 18 500 108 000 23 000 | 37 000 28 000 46 000 19 000 120 000 — |
Inventory at 1 July 2016 was $22 500.
Required
A. Calculate the following ratios for 2016 and 2017:
1. Profit margin
2. Return on proprietor’s capital
3. Current ratio
4. Quick ratio
5. Equity ratio
6. Inventory turnover.
B. Write a short report to the owner in relation to the profitability and financial stability of the business.
C. Identify the cash flow ratios that would be useful to calculate to assist K. Pastry to more fully understand the financial health of the business.
Accounts ReceivableAccounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett