Answer to Question #303514 in Microeconomics for Margaret

Question

Lisa Eriksson is a sole trader and runs a shop selling porcelain garden pots. When she started three years ago, she bought SEK 400,000 worth of inventory. She expects to use the inventory for a total of 8 years. The rent for the premises is SEK 7000 per month and the operating costs for electricity, offices, etc. are about SEK 3000 per month. This year she expects to have a purchase of goods of 800 000 SEK. She values the stock at the beginning of the year at SEK 100 000 and at the end of the year the stock could be worth SEK 200 000. The year's interest costs amount to SEK 20 000. She estimates other costs at SEK 80 000. Sales for the year are estimated at SEK 1 800 000.

a) What will be the result for the year?

b) What will the result be enough for?

Answer 1

a) Results for the year.

Income statement for the year ended 2**2

Sales. 1,800,000

Less COGS

Opening stock. 100,000

Add Purchases. 800,000

Less closing stock. 200,000. (700,000)

Gross Profit. 1,100,000

Less Op. expenses 36,000

Rent. 84,000

Other costs. 80,000. (200,000)

Profit before tax. 900,000

Less tax@0.3. 270,000

Profit after tax. 630,000

Balance sheet as at year ended 20**

Assets

Inventory. 400,000

Total. 400,000

Capital+Liabilities

Equity. 400,000

Total. 400,000

b). What will be the result enough for?

During the year, the business was able to make a net profit of 630,000. This can be used to expand the business and pay dividends.