5)

The following is an extract of financial records of ABC ltd as at 31 December 2017.

2017 2016

GHS GHS

Sales 34,000 28,000

Gross profit 23,000 18,500

Net profit 8,000 7,500

Inventory 3,900 3,600

Current asset 7,200 5,500

Current liabilities 6,900 6,000

Net assets 22,000 19,000

Required

Compute and interpret the following ratios for the company: (16 marks)

1. a). Gross profit margin b). net profit margin c) asset utilization ratio d) current ratio e) quick ratio
2. Mention four weakness of ratio analysis. (4 marks)