Question 2

The following information of Jessy Ltd is given below: Jessy Ltd

Income Statements for the years ended:

2018 2017 $$

Sales 102,000 Cost of goods sold (63,800) Gross profit 38,200 Less: Operating expenses (15,750) Net Profit 22,450

Jessy Ltd Statements of Financial Position

70,700 (46,300) 24,400 (9,080) 15,320

Assets 2018 $$

Furniture at net book value

Closing Inventory Trade receivables Cash Total Current Assets

Total Assets

Equity and Liabilities Share Capital Retained earnings Total equity

Current Liabilities Trade payables Accruals Total Current Liabilities Total liabilities and equity

95,665

1,800 1,180 1,025 4,005

99,670

60,000 37,770 97,770

1,200 700 1,900 99,670

2017 74,065

1,050 900 600 2,550

76,615

60,000 15,320 75,320

850

445 1,295 76,615

Required: a) Calculate the following ratios for each of the 2 years:

1. Current Ratio.

2. Acid-Test Ratio.

3. Gross Profit Margin.

4. Net Profit Margin.

b) From the results of the results of the ratios computed, comment on the overall profitability of the above business over the last 2 years.