The simplified financial statements of two companies, P and Q, are shown below at Figure 7.8.

Assuming that interest is charged on the long-term loan at 10 per cent per annum, calculate the following ratios for 20X8 and comment on the results:

  

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Figure 7.3 Financial statements for P and Q Income statement for 2008 Sales less Cost of goods sold Gross profit less Depreciation Other expenses Net profit Balance sheet as at 31 December 2008 Equipment at cost less Depreciation Inventory at cost Net monetary current assets less Long-term loan Share capital Retained profits Other reserves 45,000 (36,0000 $,000 (3,500) (1,500) 4,000 35,000 (3.5000 31,500 10,500 2,000 (10,000) 34,000 25,000 4,000 5,000 34,000 40,509 (32,727) 8,182 (2,917) (1,364) 3,901 29,167 (2,917) 26,250 10,000 2,000 (10,000) 28,250 25,000 1,901 (651) 28,250 Figure 7.3 Financial statements for P and Q Income statement for 2008 Sales less Cost of goods sold Gross profit less Depreciation Other expenses Net profit Balance sheet as at 31 December 2008 Equipment at cost less Depreciation Inventory at cost Net monetary current assets less Long-term loan Share capital Retained profits Other reserves 45,000 (36,0000 $,000 (3,500) (1,500) 4,000 35,000 (3.5000 31,500 10,500 2,000 (10,000) 34,000 25,000 4,000 5,000 34,000 40,509 (32,727) 8,182 (2,917) (1,364) 3,901 29,167 (2,917) 26,250 10,000 2,000 (10,000) 28,250 25,000 1,901 (651) 28,250

Answer rating: 100% (QA)

1 Gross Profit Ratio Gross Profit Ratio Gross Profitturnover 100 Gross Profit Ratio P 900045000 100 Gross Profit Ratio P 02 or 20 Gross Profit Ratio Q ... View the full answer