Question 2

1. Using the financial statements created in Question 1, calculate the following ratios for the business: (15 marks / 1.5 marks each)

i) Gross Profit Margin

ii) Net Profit Margin

iii) Return on Assets

iv) Return on Equity

v) Current ratio

vi) Quick ratio

vii) Net Cash Flow ratio

viii) Debt ratio

ix) Asset Turnover ratio

x) Asset 'Days' Turnover

b) Explain why the Return on Assets is different to the Return on Equity in the calculations in a) and what it indicates about the business's choice of capital structure. (200 words maximum) (5 marks)