The following information relates to two businesses in the same line of business for the year ended 30 April 19_4:

Required:

(a) After making all the necessary adjustments for each separate business calculate:
(i) the rate of stock turnover;
(ii) the gross profit/sales and the net profit/sales ratios;
(iii) the working capital ratio;
(iv) the return on proprietor’s capital employed calculated on the adjusted opening capital. (14 marks)

(b) As a potential buyer of one of the businesses, draft a short report ifidicating which business appears to be the more attractive investment.
Include in your report any reservations you may have and use the results of your calculations to support your argument.

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A. Fresco's Business Average stock at cost 420 000 Sales 50 000 16.000 15.000 20% Drawings for the year Selling and administration expenses Mark-up on cost Balance Sheets as at 30 April 19-4 Fixed assets Land and buildings (At cost) Plant and machinery (Net book value) B. Pick's Business 250 000 80 000 21 500 25 000 25% 60 000 25 000 Motor vehicles 85 000 100 000 55.000 (Net book value) 28 000 183 000 Current assets 30 000 Stock 70 000 Trade debtors 60 000 35 000 20 000 Balance at bank - 5.000 125 000 Cash 1 500 96 500 210 000 279 500 Financed by: 181 000 Capital account 203 500 Current liabilities 28 000 Trade creditors 1000 Accrued expenses 29,000 Bank overdraft 46 000 2000 28 000 76 000 210 000 279 500