QUESTION 1

From the following information of two sole trader enterprises conducting similar businesses, prepare:

1. Ratio calculations in the table below for comparison of profitability, asset efficiency, liquidity and capital structure.
2. Vertical analysis of the Balance Sheets for both enterprises.

Round all calculations to 2 decimal places.

	Balance Sheet data (end-of-year)
	Hi Enterprises $	Lo Enterprises $
Current assets	24 000	32 000
Motor vehicles (net)	19 000	27 000
Total assets	43 000	59 000
Current liabilities	14 000	17 000
Non-current liabilities	17 600	21 400
Total liabilities	31 600	38 400
Net assets	11 400	20 600
Total equity	11 400	20 600

	Income Statement data
	Hi Enterprises $	Lo Enterprises $
Net sales	60 000	94 000
Cost of sales	(45 000)	(73 000)
Gross profit	15 000	21 000
Selling and administrative expenses	(7 300)	(8 800)
Wages expense	(6 400)	(7 200)
Net Profit	1 300	5 000

	Beginning -of-year balances
	Hi Enterprises	Lo Enterprises
Total assets	39 000	54 000
Total equity	10 800	18 600

1. Ratio calculations in the table below for comparison of profitability, asset efficiency, liquidity and capital structure.

Round all calculations to 2 decimal places

Ratio	Hi Enterprises	Lo Enterprises
ROE
ROA
Gross Profit Margin
Profit Margin
Asset turnover
Current Ratio
Debt Ratio

Analysis of the following items:

Profitability:

Asset efficiency:

Liquidity:

Capital Structure:

B Vertical Analysis of the Balance Sheets

	Balance Sheet data (end-of-year)		Balance Sheet data (end-of-year)
	Hi Enterprises ($)	%	Lo Enterprises ($)	%
Current assets
Motor vehicles (net)
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity