(10)

Shedz is a business that sells garden sheds and other wooden buildings. The sheds are sold online and they are delivered to customers using the companys vehicles.

The owner, Clare, has given you some information about the financial performance of the business. She has asked you to analyse this information using ratio analysis.

Extract of Financial Information for Shedz

Cost of sales	195 000
Gross profit	65 000
Expenses	13 000
Capital employed	416 000
Opening inventory	42 000
Closing inventory	36 000

(A) Calculate your gross profit margin ratio, show your working.

(B) Calculate the profit margin ratio, show your working

(C) Calculate the inventory turnover ratio

Shedz must depreciate the value of the vehicles in its accounts.

(d) Discuss the advantages and disadvantages of using the reducing balance method to depreciate the value of the vehicles in its accounts.