Martha is the accountant of a trading business. During the past year she produced interim accounts for the six months ended 30 November 19X5, and draft final accounts for the year ended 31 May 19X6, as follows:

Prepare a report, using appropriate accounting ratios, to explain the changes in the financial situation of the business during the year ended 31 May 19X6.

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Sales (all on credit terms) Interim accounts 140,000 Draft final accounts 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 30,000 30,000 Retained earnings 60,000 74,000 90,000 104,000 Notes: 1 Average stock was 14,000 during the first six months. 2 Current assets were: Stock Debtors Bank 30 Nov 19X5 31 May 19X6 16,000 25,000 24,000 28,000 2,000 18,000 42,000 71,000