You are provided with the following gross profit details for theyear ending 30 t

Question

You are provided with the following gross profit details for theyear ending 30th June 2010 and comparative informationfrom the balance sheet:

                                                                                                            $

Sales (credit)                                                                                     6000

Openinginventory                                            2400

Purchases                                                       10000

                                                                       12400

Closing inventory                                            5000

GrossProfit                                                                   7400

                                                                                   52600

Balance sheet extract as at 30th June2009                   2010

Total Assets                                       80000                       50000             

Accounts receivable                              6000               5000

Inventory                                              2400                   5000

Current assets                                     55000              25000

Current liabilities                                 10000                 9500                                     

You are required to calculate

Ø      Current ratio

Ø      Liquid ratio

Ø      Rate of stock turnover

Ø      Debtor collection period

Ø      Total asset turn over

Explanation / Answer

Hey , This is quite simple. I will give you the formula . Just plug in the values and you will get theanswer. Current Ratio Current Assets / Current Liabilities Liquid Ratio ( Current Assets - Inventory ) / CurrentLiabilities   Rate of Stock Turnover Cost of Goods Sold / Average inventory Debtor Collection Period 360 / Debtors Turnover Ratio Total Asset Turnover Cost of Goods Sold / Average Total Assets Current Ratio Current Assets / Current Liabilities Liquid Ratio ( Current Assets - Inventory ) / CurrentLiabilities   Rate of Stock Turnover Cost of Goods Sold / Average inventory Debtor Collection Period 360 / Debtors Turnover Ratio Total Asset Turnover Cost of Goods Sold / Average Total Assets

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