Najim wants to analyse the results of his trading for the year ended 31 December 2005 and has prepared his Trading and Profit and Loss Account and Balance Sheet. He compares these with the final accounts for the previous year. The Trading and Profit and Loss Accounts and Balance Sheets for the two years are as follows.

Further information 

1. 60% of Najim's sales are on credit. 

2. Najim purchases all his stock of goods on credit. 

3. The only current assets are stock, trade debtors and a bank balance. 

Required 

(a) Calculate the following ratios to two decimal places for each of the years ended 31 December 2004 and 2005. 

(i) Gross profit percentage 

(ii) Net profit percentage 

(iii) fixed asset turnover 

(iv) Stockturn 

(v) Debtors' days 

(vi) creditors' days 

(vii) Current ratio 

(viii) Liquid (acid test) ratio 

(b) Compare the performance of Najim's business in 2005 with its performance in 2004, using the ratios calculated in (a), and comment on the comparison.

Transcribed Image Text:

Trading and Profit and Loss Accounts Sales Less cost of sales Opening stock Purchases Closing stock Gross profit Less expenses Net profit for the year ended for the year ended 31.12.04 31.12.05 S 12 000 $4.000 116 000 Com 128 000 16 000 $ 6104 172 308 112 000 60 308 1028 760 38.769 KAM 21 539 $ 16 000 125 500 141 500 14 000 $ 187 500 127 500 60 000 4. 32 678 ne fund 27 322