Lemon Ltd. and Pear Ltd. are retailers trading in similar goods, and situated in the same area. Their summarized Revenue Accounts and Balance Sheets relating to the last financial year are as follows:

Required:

(a) Calculate the following accounting ratios for both companies.
(i) Current Ratio (ii) Liquidity (acid test) Ratio (iii) Rate of Stock Turnover (iv) Gross Profit Percentage of Sales (v) Net Profit Percentage of Sales (vi) Return on Capital Employed.

(b) As a customer using these two shops what differences would you expect to find between them?

Transcribed Image Text:

Revenue Accounts Lemon Pear Lemon Pear 000 000 000 000 Opening Stock 30 10 Sales 200 200 Purchases 144 152 Closing Stock 36 8 Overhead Costs 46 31 Net Profit 16 15 236 208 236 208 Balance Sheets Lemon Pear Lemon Pear 000 000 000 000 Issued Share Capital 100 100 A Fixed Assets 128 120 Retained Profits CL Bank Overdraft 80 20 Stock 36 8 2 CADebtors 30 19 - CLTrade Creditors 26 25 Bank 12 - 206 147 206 147