UNIT NAME:BUSINESS FINANCE

UNIT CODE:KFI 200

CAT 1

The executive director of Pesa Ltd has circulated the following information as part of board paper:

Pesa Ltd.

Financial Performance for the year ended 31 March:

2016

2017

i)

ii)

iii)

iv)

Return on investment

Gross profit on sales

Number of days credit given

Administrative cost of sales

12%

25%

30 days

7%

10%

20%

45 days

10%

Required

a) Brief report on each of the above 4 ratios indicating the reservation, if any, you may have or judging them as improvement in performance.

b) Tajiri Ltd has sales of Sh.20,000,000 in 2016Beginning and closing stock was Sh.800,000 and Sh.2,200,000 respectively.G.P. margin is usually 25% of sales.

Required

i) Stock turnover ratio

ii) Number of days stock held

iii) Brief explanation on how the ratio computed in (i) above can be improved