The following details are for the business of Peter Smith, who is worried about the profitability and financial structure of his business at 30 June 2015, especially since the bank is requiring repayment of his overdraft.

30 June 2014 30 June 2015

$ $

Sales (credit) 60,000 90,000

Cost of goods sold 39,000 63,000

All other expenses 12,000 21,000

Cash at bank 12,000 (18,000)

Inventory 18,000 33,000

Trade debtors 12,000 30,000

Non-current assets (net) 24,000 48,000

Trade creditors 6,000 9,000

Peter Smith, Capital 60,000 72,000

Non-current liabilities - 12,000

Inventory at 1 July 2013 was $15,000

Trade debtors at 1 July 2013 were $10,000

Calculate the following ratios for 2014 and 2015

Net profit margin

Return on owners equity

Current ratio

Acid test ratio

Gearing

Inventory turnover period

Write a short report to the owner about:

Profitability

Short term liquidity

Long term solvency