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The following information relates to Tea4U Traders at 28 February 2020, the end of the financial year. - Year end Year end 28 February 2017
The following information relates to Tea4U Traders at 28 February 2020, the end of the financial year. - Year end Year end 28 February 2017 28 February 2016 R R Inventory on hand 25 000 21 000 Trade debtors 36 000 37 000 Cash in Bank 47 000 Trade creditors 24 000 34 000 Bank overdraft 2 000 Sales (all on credit) 234 000 179 800 Purchases (all on credit) 74 500 57 400 Interest expense 8 400 12 000 Profit after interest but before tax for the year 160 680 118 495 Profit after tax for the year 123 600 91 150 Industry averages as at 28 February 2020. Gross margin Current ratio Days inventory on hand Debtors collection period Creditors payment period Interest cover 53,55% 2,53: 1 105,20 days 80,04 days 85,11 days 13,24 times Required: For each of the following (a) (f) below: Calculate the ratio for the year ended 28 February 2020. State whether the ratio is better or worse than the industry average. Give one good reason why this might be so. Assume a 365-day year, round off to 2 decimal places if necessary and show the formulae clearly a) Gross margin b) Current ratio 5 (5) (4) (4) c) Debtors collection period d) Creditors payment period e) Days inventory on hand f) Interest cover (4) (4) (4)
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