Rate of stock turnover, Gross profit margin, Current ratio, Acid test ratio, Return on capital employed.

Accounting
Rate of stock turnover, Gross profit margin, Current ratio, Acid test ratio, Return on capital employed.

ScanSolve AI Answer

Answer

4.02 times

Here are the calculations for the required ratios:

a) Rate of stock turnover Step 1: Calculate the average stock. AverageStock=OpeningStock+ClosingStock2Average Stock = \frac{Opening Stock + Closing Stock}{2} AverageStock=$63,000+$50,3002=$113,3002=$56,650Average Stock = \frac{\$63,000 + \$50,300}{2} = \frac{\$113,300}{2} = \$56,650 Step 2: Calculate the rate of stock turnover. RateofStockTurnover=CostofGoodsSoldAverageStockRate of Stock Turnover = \frac{Cost of Goods Sold}{Average Stock} RateofStockTurnover=$227,700$56,650≈4.02timesRate of Stock Turnover = \frac{\$227,700}{\$56,650} \approx 4.02 times The rate of stock turnover is 4.02times\boxed{4.02 times}.

b) Gross profit margin Step 1: Use the formula for gross profit margin. GrossProfitMargin=GrossProfitSales×100%Gross Profit Margin = \frac{Gross Profit}{Sales} \times 100\% GrossProfitMargin=$190,650$418,350×100%≈45.57%Gross Profit Margin = \frac{\$190,650}{\$418,350} \times 100\% \approx 45.57\% The gross profit margin is 45.57%\boxed{45.57\%}.

c) Current ratio Step 1: Calculate total current assets. CurrentAssets=Stock+Debtors+CashCurrent Assets = Stock + Debtors + Cash CurrentAssets=$50,300+$32,500+$18,350=$101,150Current Assets = \$50,300 + \$32,500 + \$18,350 = \$101,150 Step 2: Use the formula for the current ratio. CurrentRatio=CurrentAssetsCurrentLiabilitiesCurrent Ratio = \frac{Current Assets}{Current Liabilities} CurrentRatio=$101,150$41,750≈2.42:1Current Ratio = \frac{\$101,150}{\$41,750} \approx 2.42:1 The current ratio is 2.42:1\boxed{2.42:1}.

d) Acid test ratio Step 1: Calculate quick assets (current assets excluding stock). QuickAssets=CurrentAssets−StockQuick Assets = Current Assets - Stock QuickAssets=$101,150−$50,300=$50,850Quick Assets = \$101,150 - \$50,300 = \$50,850 Step 2: Use the formula for the acid test ratio. AcidTestRatio=QuickAssetsCurrentLiabilitiesAcid Test Ratio = \frac{Quick Assets}{Current Liabilities} AcidTestRatio=$50,850$41,750≈1.22:1Acid Test Ratio = \frac{\$50,850}{\$41,750} \approx 1.22:1 The acid test ratio is 1.22:1\boxed{1.22:1}.

e) Return on capital employed Step 1: Calculate capital employed. CapitalEmployed=Capital+NetProfit−DrawingsCapital Employed = Capital + Net Profit - Drawings CapitalEmployed=$110,500+$40,000−$21,400=$129,100Capital Employed = \$110,500 + \$40,000 - \$21,400 = \$129,100 Step 2: Use the formula for return on capital employed. ReturnonCapitalEmployed=NetProfitCapitalEmployed×100%Return on Capital Employed = \frac{Net Profit}{Capital Employed} \times 100\% ReturnonCapitalEmployed=$40,000$129,100×100%≈30.98%Return on Capital Employed = \frac{\$40,000}{\$129,100} \times 100\% \approx 30.98\% The return on capital employed is 30.98%\boxed{30.98\%}.

Send me the next one 📸

Was this helpful?

Need help with your own homework?

Get instant step-by-step solutions to any question. Free to start.

Ask Your Question
Got a syllabus? Photograph it and I'll tell you what's due and what's worth the most.

More Accounting Questions

Qනාමල්ගේ ව්‍යාපාරයේ 2017 ජුලි මාසයේ විකුණුම් විස්තරය පහත දැක්වේ.QCalculate the figures for the allocated income tax based on the information provided in the table an…QDefine the term source document. Name any six source documents. For each source document named in (b…QExplain the following entries made in a bank account for Manani Hotel as it appears in their ledgerQPrepare creditors account
See all Accounting questions →

Still have questions?

Quick Answer

a) Rate of stock turnover Step 1: Calculate the average stock. Average Stock = Opening Stock + Closing Stock2 Average Stock = (\63,000 + \50,300)/(2) = (\113,300)/(2) = \56,650 Step 2: Calculate the rate of stock turnover.

Rate of stock turnover, Gross profit margin, Current ratio, Acid test ratio, Return on capital employed.
Accounting

This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.

ScanSolve AI Answer
Here are the calculations for the required ratios: a) Rate of stock turnover Step 1: Calculate the average stock. Average Stock = Opening Stock + Closing Stock2 Average Stock = (\63,000 + \50,300)/(2) = (\113,300)/(2) = \56,650 Step 2: Calculate the rate of stock turnover. Rate of Stock Turnover = Cost of Goods SoldAverage Stock Rate of Stock Turnover = (\227,700)/(\56,650) ≈ 4.02 times The rate of stock turnover is 4.02 times. b) Gross profit margin Step 1: Use the formula for gross profit margin. Gross Profit Margin = Gross ProfitSales × 100\% Gross Profit Margin = (\190,650)/(\418,350) × 100\% ≈ 45.57\% The gross profit margin is 45.57\%. c) Current ratio Step 1: Calculate total current assets. Current Assets = Stock + Debtors + Cash Current Assets = \50,300 + \32,500 + \18,350 = \101,150 Step 2: Use the formula for the current ratio. Current Ratio = Current AssetsCurrent Liabilities Current Ratio = (\101,150)/(\41,750) ≈ 2.42:1 The current ratio is 2.42:1. d) Acid test ratio Step 1: Calculate quick assets (current assets excluding stock). Quick Assets = Current Assets - Stock Quick Assets = \101,150 - \50,300 = \50,850 Step 2: Use the formula for the acid test ratio. Acid Test Ratio = Quick AssetsCurrent Liabilities Acid Test Ratio = (\50,850)/(\41,750) ≈ 1.22:1 The acid test ratio is 1.22:1. e) Return on capital employed Step 1: Calculate capital employed. Capital Employed = Capital + Net Profit - Drawings Capital Employed = \110,500 + \40,000 - \21,400 = \129,100 Step 2: Use the formula for return on capital employed. Return on Capital Employed = Net ProfitCapital Employed × 100\% Return on Capital Employed = (\40,000)/(\129,100) × 100\% ≈ 30.98\% The return on capital employed is 30.98\%$. Send me the next one 📸