The trading stock of Joan Street, retailer, has been reduced during the year ended 31 March 20X8 by £6,000 from its commencing figure of £21,000.

A number of financial ratios and related statistics have been compiled relating to the business of Joan Street for the year ended 31 March 20X8. These are shown below alongside comparative figures for a number of retailers who are members of the trade association to which Joan Street belongs:

Joan Street has supplied all the capital for her business and has had no drawings from the business during the year ended 31 March 20X8.

Required:

(a) Prepare the trading and profit and loss account for the year ended 31 March 20X8 and balance sheet as at that date of Joan Street in as much detail as possible.

(b) Identify two aspects of Joan Street’s results for the year ended 31 March 20X8 which compare favourably with the trade association’s figures and identify two aspects which compare unfavourably.

(c) Outline two drawbacks of the type of comparison used in this question.

Authors’ Note: take the closing figure at 31 March 20X8.

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Net profit as % net capital employed (see Authors' Note) Net profit Sales Sales Net capital employed Fixed assets Sales Working capital ratio: Current assets Current liabilities Acid test ratio: Bank + Debtors Current liabilities Gross profit Sales Debtors collection period: Debtors x 365 Sales Stock turnover (based on average stock for the year) Joan Street % 15 9 166²3 45 400 275 25 36¹ days 10 times Trade association % 16 8 200 35 287%2 187%2 26 32¹720 days 8 times