QUESTION 3 30 MARKS

The following are the final accounts of Barsha Minimart for the year ended 31 December 2020.

Barsha Minimart

Income statement for the year ended 30 June 2020

Sales

$ $

300 000

Less: Sales return (9 600)

Net sales 290 400

Less:

Opening inventories 75 600

Add: Purchases 104 400

Less: Closing inventories

180 000

(36 000)

Cost of goods sold 144 000

Gross profit 146 800

Add: Revenue 18 000

Less: Expenses (136 200)

Net profit 28 600

Barsha Minimart

Balance sheet as at 30 June 2020

Non-current assets

$ $

220 000

Current assets

Inventories 36 000

Accounts receivable 21 400

Cash 9 000

Less: Current liabilities

66 400

(31 400) 35 000

255 000

Financed by:

Capital 226 400

Add: Net profit 28 600 255 000

255 000

Note: Assume all the sales were made on credit. The balance for account receivable at 30 June 2019

was $ 29 400

The industry average for the financial ratios are:

Gross Profit Margin = 40.0%

Net profit margin = 15.0%

Inventories turnover ratio = 4.5 times

Acid test ratio/Quick ratio = 1.30:1.00

Account receivable collection period = 25 days

ACCY111 Accounting Fundamentals in Society Page 10 of 12

Required:

A. Compute the following ratios.

a) Gross Profit Margin

b) Net profit margin

c) Inventories turnover ratio

d) Quick ratio

e) Account receivable collection period

(15 marks)

B. Interpret the calculated financial ratios and evaluate the performance of Barsha Minimart as

compared to the industry average.

(15 marks)