12.3 The following information has been extracted from the accounts of Lock Ltd, a wholesale trading company:
Question:
12.3 The following information has been extracted from the accounts of Lock Ltd, a wholesale trading company:
Balances at 31 December 20X1 20X2
£ £
Fixed assets 500,000 550,000 Trade debtors 125,000 150,000 Cash at bank 25,000 –
Proposed dividend 20,000 60,000 Overdraft – 20,000 Trade creditors 80,000 100,000 Stock 150,000 200,000 Results for the year to 31 December 20X1 20X2
£ £
Sales 2,000,000 3,000,000 Cost of sales 1,000,000 1,450,000 Overhead costs 800,000 1,300,000
(a) A statement showing the return on capital employed, the working capital ratio and the liquidity ratio. Your answer should be presented in the following form:
20X1 20X2 Return on capital employed ————— —————
Working capital ————— —————
Working capital ratio ————— —————
Liquidity ratio ————— —————
(b) A brief discussion of the implications of the information calculated above.
Note For the purpose of your calculations, capital employed is defined as shareholders’ equity.
Step by Step Answer:
Introduction To Accounting
ISBN: 9780761970378
3rd Edition
Authors: Pru Marriott, J R Edwards, Howard J Mellett