Question 3 (25 marks)

Consider the following information.

K Malomo

Statement of Income for the year ended 31 December 2020

P P

Sales 60000

Stock 1, Jan 10000

Purchases 31000

41000

Less: Stock 31, Dec (4000)

Cost of Goods Sold (37000) Gross profit 23000 Less Expenses (8000) Net Profit 15000

K Malomo

Statement of Financial Position as at 31 December 2020

P P

Equipment 25000

Motor vehicle 21000

46000

Current Assets

Stock, 31 Dec 4000

Debtors 5000

Cash at bank 8000

Cash in hand 3000

20000

Total Assets 66000

Capital

Capital, 1 Jan 45000

Add: Net profit 15000

Less: Drawings (10000)

50000

Non-current liabilities

Bank loan 10000

Current liabilities

Creditors 6000

Total Capital + Liabilities 66000

Required:

Calculate the following: a. Profitability ratios (12 marks)

b. Liquidity ratios (4 marks)

c. Efficiency ratios. (9 marks)