The summarised accounts of Hope (Eternal Springs) Ltd. for the years 19X9 and 19X0 are given below.

Trading and Profit and Loss Accounts for the year ended 31 December 19X9 19X0

£’000 £’000 £’000 Sales 200 280 Less Cost of sales 150 210 Gross profit Less 50 70 Administration expenses 38 46 Debenture interest - 4 50 Net profit 12 Balance Sheets as at 31 December 20 19X9 19X0 19X9 19X0

£’000 £’000 £’000 £’000 Ordinary share capital 100 100 Fixed assets, at cost Profit and Loss Account 30 41 Less Depreciation 110 140 8% Debentures _ 50 Creditors 15 12 Stock 20 30 Bank 10 Debtors 25 28 Bank - 5 155 203 155 203 Stock at 1 January 19X9 was £50,000 Required:

(a) Calculate the following ratios for 19X9 and 19X0:

(i) Gross profit: Sales

(ii) Stock turnover

(iii) Net profit: Sales

(iv) Quick (‘acid test’)

(v) Working capital

(vi) Net profit: Capital employed

(b) State the possible reasons for and significance of any changes in the ratios shown by your calculations.

{Midland Examining Group: GCSE)