You are to study the following financial statements for two similar types of retail store and then answer the questions which follow.

Summary of Financial Statements A B

£ £ £ £

Sales 80,000 120,000 Less Cost of goods sold Opening stock 25,000 22,500 Add Purchases 50,000 91,000 75,000 113,500 Less Closing stock 15,000 60,000 17,500 96,000 Gross profit 20,000 24,000 Less Depreciation 1,000 3,000 Other expenses 9,000 10,000 6,000 9,000 Net profit 10,000 15,000 Balance sheets A B Fixed assets Equipment at cost 10,000 20,000 Less Depreciation to date 8,000 2,000 6,000 14,000 Current assets Stock 15,000 17,500 Debtors 25,000 20,000 Bank 5,000 2,500 45,000 40,000 Less Current liabilities Creditors 5,000 40,000 10,000 30,000 42,000 44,000 Financed by:

Capitals Balance at start of year 38,000 36,000 Add Net profit 10,000 15,000 48,000 51,000 Less Drawings 6,000 7,000 42,000 44,000 Required:

[a) Calculate the following ratios:

(i) gross profit as percentage of sales; (vi) current ratio;

(ii) net profit as percentage of sales; (vii) acid test ratio;

(iii) expenses as percentage of sales; (viii) debtor/sales ratio;

(iv) stockturn; (ix) creditor/purchases ratio.

(v) rate of return of net profit on capital employed (use the average of the capital account for this purpose);

{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? Give possible reasons.