Study the following financial statements for two very similar privately owned department stores that each have one store in the city centre of the same large city and then answer the questions which follow.

Required:
(a) Calculate the following ratios to one decimal place:
(i) Gross profit as % of revenue;
(ii) Net profit as % of revenue;
(iii) Expenses as % of revenue;
(iv) Inventory turnover;
(v) Rate of return of net profit on capital employed (use the average of the capital account
for This purpose);
(vi) Current ratio;
(vii) Acid test ratio;
(viii) Accounts receivable : revenue ratio;
(ix) Accounts payable : purchases ratio.
(b) Drawing upon all your knowledge of accounting, comment upon the differences and similarities of the accounting ratios for A and B. Which business seems to be the most efficient? Justify your opinion.

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Statements of financial position Non-current assets Building at cost Less Depreciation to date Equipment at cost Less Depreciation to date Current assets Inventory Accounts receivable Bank Total assets Current liabilities Accounts payable Net assets Financed by: Capital accounts Balance at start of year Add Net profit Less Drawings Statements of profit or loss Revenue Less: Cost of goods sold Opening inventory Add Purchases Less Closing inventory Gross profit Less Depreciation Other expenses Net profit Summary of Financial Statements A £000s 480 (408) 224 (190) 224 424 6 384 2,080 2,464 (224) 35 509 £000s 72 34 106 654 760 (392) 368 384 96 480 (112) 368 2,880 (2,240) 640 (544) 96 £000s 704 (352) 288 (144) 416 192 3 480 3,600 4,080 (416) 64 448 B £000s 352 144 496 611 1,107 (403) 704 688 144 832 (128) 704 4,320 (3,664) 656 (512) 144