Jack and jill each carry on business as wholesalers of the same product. Their respective accounts for the year ended 31 December 20X0 are as follows:

(a) All sales are on credit.

(b) The amounts of debtors and creditors have not changed significantly over the year.

(c) All fixed assets are at written-down value.
Required:
Compare the profitability and financial position of the two businesses by:

(a) calculating suitable ratios for each business;

(b) commenting on the significance of the results of your calculations.

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Profit and loss accounts Jack Jill Sales 144,000 140,000 Cost of sales: Opening stocks 28,000 3,200 Purchases 124,000 121,600 152,000 124,800 Closing stocks 32,000 120,000 4,800 120,000 Gross profit 24,000 20,000 Selling expenses 7,200 2,800 Admin expenses 8,160 15,360 9,500 12,300 Net profit 8,640 7,700