Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(a) Compute the following ratios based on the information given for Faber Trading: (i) Gross profit margin ratio (%) (ii) Net profit margin ratio (%)
(a) Compute the following ratios based on the information given for Faber Trading:
(i) Gross profit margin ratio (%)
(ii) Net profit margin ratio (%)
(iii) Current ratio (times)
(iv) Quick ratio (times)
(v) Average Stock Turnover Period (days)
(vi) Debtor Collection Period (days)
(b) Using the appropriate financial ratios calculated in (a), compare and comment on the performance and financial position of the two companies in terms of:
(i) Profitability
(ii) Liquidity (Solvency)
(iii) Efficiency of its inventory management.
Income Statement for the year ended 31 December 2021 Starcity Sales Less: Cost of sales Opening Stock Purchases Less: Closing stock Cost of sales Gross Profit Less: Depreciation Other expenses Net Profit 62,500 495,000 557,500 143,850 79,200 69,700 $ 954,700 413,650 541,050 148,900 392,150 Greencity 52,450 525,560 578,010 89,550 104,700 89,800 $ 876,000 488,460 387,540 194,500 193,040
Step by Step Solution
★★★★★
3.36 Rating (152 Votes )
There are 3 Steps involved in it
Step: 1
a i Gross profit margin ratio Gross profit margin ratio for Scarcity 541050 954700 x 100 5663 Gross profit margin ratio for Greencity 387540 578010 x ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started