Martha is the accountant of a trading business. During produced interim accounts for the six months ended 30 and draft final accounts for the year ended 31 May 19_ the past year she November 19_S, 6, as follows:

(3) Current liabilities consisted entirely of trade creditors.
Martha informs you that the business leased additional premises from 1 December 19_5, and that sales arising therefrom totalled £70 000 for the six months to 31 May 19_6, with an average mark-up on cost prices of 150% being made on those goods.
Expenses relating to these additional premises totalled £21 000 for the period.
Two-fifths of the closing stock of the business was located at these premises.
Prepare a report, using appropriate accounting ratios, to explain the changes in the financial situation of the business during the year ended 31 May 19_6.

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Draft Interim Accounts Final Accounts Sales (all on credit terms) 140 000 336 000 Cost of sales (note 1) 42 000 112 000 Gross profit Less expenses 98 000 224 000 56 000 168 000 Net profit 42 000 56 000 Fixed assets 70 000 63 000 Current assets (note 2) 42 000 71 000 Current liabilities (note 3) (22 000) (30 000) 90.000 104 000 Share capital Retained earnings 30.000 30 000 60 000 74 000 90 000 104 000