The following information relates to the books of accounts of Adom Ltd.
Trading, profit, and loss account for the year ended 31st December 2014
| opening stock 20,000 purchase 160,000 180,000 less closing stock 36,000 cost of goods sold 144,000 Gross profit c/d 96,000 240,000 selling & distri. exp 73,200 administrative exp 14,800 Net profit 8,000 96,000 |
sales 240,000
240,000 |
Balance sheet as at 31st December 2014
| Share capital: Ordinary shares 100,000 Preference shares 10,000 General reserve 24,000 Profit & loss acc 8,000 32,000 142,000 Current liabilities Trade creditors 28,000 Accruals 12,000 40,000 182,000 |
Fixed assets at cost 125,000 Less depreciation 25,000 100000 Current assets: Stock 36,000 Debtors 39,000 Cash in bank 7,000 82,000 |
You are required to calculate any six of the following
(a) Gross profit percentage
(b) Net profit percentage
(c) Return on capital employed
(d) Current ratio
(e) Acid test ratio
(f) Rate of stock of turnover
(g) Working capital
(h) Shareholders fund
(i) Liquid assets
Explanation
Adom limited
Accounting ratios
(a) Gross profit percentage = \(\frac{\text{gross profit}}{sales}\) x 100
= \(\frac{96,000}{240,000} x 100 = 40%
(b) Net profit percentage = \(\frac{\text{net profit}}{sales}\) x 100
= \(\frac{8,000}{240,000} x 3.33%
(c) Return on capital employed = \(\frac{\text{net profit}}{\text{capital employed}}\) x 100
= \(\frac{8,000}{142,000}\) x 100 = 5.63%
(d) Current ratio = \(\frac{\text{current asset}}{\text{current liability}}\)
= \(\frac{82,000}{40,000}\) = 2.05:1
(e) Acid test radio = \(\frac{\text{current assets stock}}{\text{current liability}}\)
= \(\frac{144,000}{28,000}\) 1.15:1
(f) Rate of stock of turnover = \(\frac{\text{Cost of goods sold}}{\text{Average stock}}\)
= \(\frac{144,000}{28,000}\) = 5.14 times
(g) Working capital = Current asset - Current liabilities
82,000 - 40,000 = 42,000
(h) Shareholders fund = Starting capital + Retained earnings
= 100,000 + 10,000 + 24,000 + 8,000
= 142,000
(i) Liquid assets = Current assets - (Debtors + stock)
= 82,000 - (39,000 + 36,000)
= 7,000