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The owners of H Ltd and T Ltd are having a friendly argument over the relative performance of their two similar businesses. The following information
The owners of H Ltd and T Ltd are having a friendly argument over the relative performance of their two similar businesses. The following information is available:
Required: a. For each company, calculate to one decimal place: i. Gross profit margin ii. Stock turnover iii. Net profit margin iv. Return on capital employed v. Trade receivables collection period vi. Current ratio vii. Acid test ratio b. Comment on the performance of each of the companies, using the rations you have calculated (25)
\begin{tabular}{|l|r|r|} \hline & H Ltd \$ & T Ltd \$ \\ \hline Cash & 4000 & 100 \\ \hline Sales & 200000 & 200000 \\ \hline Operating profit & 8000 & 80000 \\ \hline Closing inventory & 8000 & 30000 \\ \hline Trade receivables & 3000 & 33000 \\ \hline Bank overdraft & Nil & 5000 \\ \hline Opening inventory & 10000 & 40000 \\ \hline Capital employed & 320000 & 320000 \\ \hline Trade payables & 7500 & 50000 \\ \hline Purchases & 140000 & 60000 \\ \hline \end{tabular}Step by Step Solution
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