You are to study the following financial statements for X stores and then answer the questions which follow.

Note. 90% of sales are on credit and all purchases are on credit.

Financial Statements

P P

Profit and loss accounts

Sales 555,000

Less Cost of goods sold

Opening stock 100,000

Add Purchases 200,000

300,000

Less Closing stock (60,000) (240,000)

Gross profit 315,000

Less Depreciation 5,000

Wages, salaries and commission 165,000

Other expenses 45,000 (215,000)

Net profit 100,000

Balance sheets

Fixed assets

Equipment at cost 50,000

Less Depreciation to date ( 40,000) 10,000

Current assets

Stock 60,000

Debtors 125,000

Bank 25,000

210,000

Less Current liabilities

Creditors (104,000) 106,000

116,000

Financed by:

Capitals Balance at start of year 76,000

Add Net profit 100,000

176,000

Less Drawings (60,000)

116,000

Required:

a. Calculate the following ratios for X:

i. Gross Profit Ratio

ii. Return on assets

iii. Stock turnover ratio

iv. Current Ratio

v. Acid test Ratio

vi. Return on equity

vii. Trade debtors collection period

viii. Debt collection period

b Discuss any two-investment ratios.