Ex. 3. You are considering the purchase of a small business and have managed to obtain a copy of its financial statements for the last complete accounting year to 30 September 2013. These appear as follows: Income statement for the year to 30 September 2013. S Sale 385,200 Les cost of goods sold Opening inventories 93.250 Purchases 174,340 Less closing inventories (84.630) Gross profit (182.960) 202,240 Less expenses Selling and delivery costs 83.500 Administration costs 51.420 Depreciation 36,760 Net profit (171,680) 30,560 Assets Non-current assets Balance Sheet at 30 September 2013 S Assets at cost Less accumulated depreciation 235,070 (88,030) 147,040 Current assets Inventories 84,630 Receivables and prepayments 36,825 Bank and cash 9.120 130.575 277,615 Capital and liabilities Capital at 1 October 2012 Net profit for the year 197,075 30,560 Proprietor's drawings Current liabilities Payables and accruals (12.405) 215.230 62,385 277,615 Calculate and comment the following accounting ratios from the financial statements presented above: (a) Gross profit to sales revenue ratio (b) Return on equity 2 Ex. 3. You are considering the purchase of a small business and have managed to obtain a copy of its financial statements for the last complete accounting year to 30 September 2013. These appear as follows: Income statement for the year to 30 September 2013. S Sale 385,200 Les cost of goods sold Opening inventories 93.250 Purchases 174,340 Less closing inventories (84.630) Gross profit (182.960) 202,240 Less expenses Selling and delivery costs 83.500 Administration costs 51.420 Depreciation 36,760 Net profit (171,680) 30,560 Assets Non-current assets Balance Sheet at 30 September 2013 S Assets at cost Less accumulated depreciation 235,070 (88,030) 147,040 Current assets Inventories 84,630 Receivables and prepayments 36,825 Bank and cash 9.120 130.575 277,615 Capital and liabilities Capital at 1 October 2012 Net profit for the year 197,075 30,560 Proprietor's drawings Current liabilities Payables and accruals (12.405) 215.230 62,385 277,615 Calculate and comment the following accounting ratios from the financial statements presented above: (a) Gross profit to sales revenue ratio (b) Return on equity 2