John Smith has just completed his first year in business as a sole trader and has received the following draft set of accounts from his accountant.

John is anxious to compare his results with other businesses and a friend has given him the following information concerning Quicksale Ltd., a large retailer selling similar goods to John with several branches in the locality.

Required:

(a) Write a report comparing the performance of J. Smith and Quicksale Ltd. for the year ended 31 October 19_4, using relevant accounting ratios.

(b) Comment on the usefulness to J. Smith of the comparison between his business and Quicksale Ltd.

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JOHN SMITH Trading and profit and loss account for year ended 31 October 19_4 Sales less: Cost of sales 50 000 32 000 Gross profit 18.000 less: General expenses 3.000 Wages 4 000 Rent and rates 5 000 Depreciation 2.000 14.000 Net profi: 4.000 Balance Sheet as at 31 October 19_4 Fixed Assets Fixtures at cost 7.500 less Depreciation 500 7 000 Motor van at cost 4 500 less Depreciation 1 500 3.000 10.000 Current Assets Stock Debtors Cash less: Current Liabilities Creditors 8.000 5.000 6.000 19 000 3.000 16.000 26 000