Question 2. The following summary information relates to the business of Ishfaq for the two years ended 31 December 2019 and 31 December 2020

Additional information

Inventory on 1 January 2019, $10 000.

Required:

1. Calculate for both the years ended 31 December 2019 and 31 December 2020 the:. i. Gross profit as a percentage of revenue
   2. Rate of inventory turnover
   3. Profit for the year as a percentage of revenue
   4. Return on capital employed.

0. 2. Give one possible reason for the change between the years ended 31 December 2019 and 31 December 2020:
1. Gross profit as a percentage of revenue
   2. 2. Rate of inventory turnover
      3. Return on capital employed.
   3. Calculate the current ratios and Quick (Acid test) ratio at both 31 December 2019 and 31 December 2020.
   4. Comment on the profitability and liquidity of the business over the two years ended 31 December 2019 and 2020

Revenue Cost of sales Gross profit Wages Depreciation Marketing Loan interest Other expenses Profit for the year Income Statement for the years ended 31 Dec 2019 31 Dec 2020 $ $ 310 000 420 000 (210 000) (260 000) 100 000 160 000 (48 000) (62 000) (8 000) (10 000) (2 000) (42 000) (2 000) (12 000) (12 000) 30 000 32 000 Statement of Financial Positions at 31 Dec 2019 31 Dec 2020 $ $ Assets Non-current assets 175 000 204 000 Inventory 15 000 25 000 Trade receivables 110 000 80 000 Bank 55 000 Total Assets 300 000 364 000 Equity and Liabilities Capital 200 000 200 000 Non-current liability Long term bank loan 100 000 Current liabilities Trade payables 30 000 64 000 Bank overdraft 70 000 300 000 364 000