Details $ Fixed Assets 11,500,000 Gross profit 14,000,000 Accounts receivable ...

Question

    Details
    $
    Fixed Assets
    11,500,000
    Gross profit
    14,000,000
    Accounts receivable
     3,500,000
    Stock, January 1, 2020
     5,000,000
    Operating expenses
     6,000,000
    Accounts payable
     2,000,000
    Net purchases
    12,000,000
    Net sales
    24,000,000
    Cash at bank & in hand
     7,500,000
    Cost of sales
    10,000,000
    Stock, December 31, 2020
     7,000,000
    Net profit
     8,000,000
DQ2- Your are required to answer all three (3 ) questions below
The following information was extracted from the books of Bogart Ltd for the financial year ending December 31, 2020:
1. State the formulae for the following ratios and calculate the ratios using the information from the financial statement extract above.
(a) Gross profit percentage
(b) Net profit percentage
(c) Cu
ent ratio
(d) Liquid ratio
(e) Average stock
(f) Inventory turnover
(g) Working capital
(h) Debtors collection period
2. Explain the purpose of the liquidity ratio and state two ratios that may be use to measures the liquidity of a company.
3. Explain the purpose of the profitability ratio and state two ratios that may be use to measures the profitability of a company.

discussion-question-2-financial-acc-3njcumfr.doc

Nitish Lath · Accepted Answer

1. Ratios calculations
	Ratio name
	Formula
	Figures
	Ratio
	Gross profit percentage
	Gross profit
	       14,000,000 
	58.33%
	 
	Net sales
	       24,000,000 
	 
	 
	 
	 
	 
	Net profit percentage
	Net profit
	          8,000,000 
	33.33%
	 
	Net sales
	       24,000,000 
	 
	 
	 
	 
	 
	Current ratio
	Current assets
	       18,000,000 
	              9.00 
	 
	Current liabilities
	          2,000,000 
	 
	 
	 
	 
	 
	Liquid ratio
	Liquid assets
	       11,000,000 
	              5.50 
	 
	Current liabilities
	          2,000,000 
	 
	 
	 
	 
	 
	Average stock
	(Opening stock+ Closing stock) /2
	          (5,000,000 +
	    6,000,000 
	 
	
	          7,000,000)/2
	 
	 
	 
	 
	 
	Inventory turnover
	Cost of sales
	       10,000,000 
	              1.67 
	 
	Average inventory
	          6,000,

Details $ Fixed Assets 11,500,000 Gross profit 14,000,000 Accounts receivable 3,500,000 Stock, January 1, 2020 5,000,000 Operating expenses 6,000,000 Accounts payable 2,000,000 Net purchases...

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