Answer to Question #106445 in Accounting for natalie

Question

Question 2
The following details appeared in the final accounts of a sole trader's business.
Current assets
R
8 400
Current liabilities 4 000
Gross profit 5 000
Net profit 2 400
Purchases 16 000
Sales 21 000
Capital 30 000
The opening and closing stocks, being identical figures, are not shown.
Required
Answer the following questions:
(a) What is the ratio between current assets and current liabilities, and
is it a satisfactory one?
(b) What is the percentage gross profit on turnover?
(c) What is the average mark-up percentage on purchases?
(d) What is the capital yield to the owner expressed as a percentage?
(e) Would the owner do better by investing his capital in a building
society at 2
7 1 % per annum? (15)

Answer 1

(a) The ratio between current assets and current liabilities is:

$8400/4000 = 2.1$

It is more than 1, so it is a satisfactory one.

(b) The percentage gross profit on turnover is:

$5000/21000×100 = 23.81 percent$

(c) The average mark-up percentage on purchases is:

$2400/16000×100 = 15 percent$

(d) What is the capital yield to the owner expressed as a percentage?

$2400/30000×100 = 8 percent$

(e) The owner would not do better by investing his capital in a building

society at 2.71 % per annum, because he gains 8% per annum.