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.