Alistair is concerned about the performance of his business. He has decided to assess the performance using ratio analysis.

He is able to provide the following information extracted from his income statement for the year ended 30 April 2018 in order to calculate ratios relating to profitability.

Required:

(a) Calculate the gross profit mark-up.

(b) Calculate the gross profit margin.

(c) Calculate the profit in relation to revenue ratio.
Alistair is particularly concerned about the liquidity of his business. He allows his credit customers 30 days’ credit. On average his suppliers also give him 30 days’ credit. He has calculated the following ratios for the accounting years 2015–2018:

(d) Assess the performance of Alistair’s business in relation to liquidity. Use the ratios provided by Alistair above.

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Cash sales Credit sales Cash purchases Credit purchases Cost of sales Gross profit Operating expenses Profit for the year 10,000 185,000 45,000 80,000 130,000 65,000 55,250 9,750