Study the following financial statements of two companies and then answer the questions which follow. Both companies are stores selling textile goods.

Required:

(a) Calculate the following ratios for each of R Ltd and T Ltd:

(b) Comment briefly on the comparison of each ratio as between the two companies. State which company appears to be the most efficient, giving what you consider to be possible reasons.

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Financial Statements R Ltd T Ltd Profit and loss accounts Sales 250,000 160,000 Less Cost of goods sold Opening stock 90,000 30,000 Add Purchases 210,000 120,000 300,000 150,000 Less Closing stock 110,000 190,000 50,000 100,000 Gross profit 60,000 60,000 Less Expenses Wages and salaries 14,000 10,000 Directors' remuneration 10,000 10,000 Other expenses 11,000 35,000 8,000 28,000 Net profit 25,000 32,000 Add Balance from last year 15,000 8,000 40,000 40,000. Less Appropriations General reserve 2,000 2,000 Dividend 25,000 27,000 20,000 22,000 Balance carried to next year 13,000 18,000