The following information were extracted from the books of Toyebi Ltd. You are required to calculate: (a) Rate of stock turnover; (b) Gross profit margin; (c) Current ratio; (d) Acid test ratio; (e) Return on capital employed.

Question

Asked on June 18, 2026Accounting

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

Accepted Answer · 2026-06-18T12:15:05.090Z

Here are the calculations based on the provided financial statements: 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: Apply the gross profit margin formula. Gross Profit Margin = Gross ProfitSales × 100\% Gross Profit Margin = (\190,650)/(\418,350) × 100\% = 0.4557 × 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: Apply the current ratio formula. 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: Apply the acid test ratio formula. 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: Determine the capital employed. Capital employed can be calculated as Fixed Assets + Working Capital, or as Total Equity + Non-current Liabilities. In this case, the closing capital (equity) is given as 129,100. Capital Employed = Fixed Assets + (Current Assets - Current Liabilities) Capital Employed = \69,700 + (\101,150 - \41,750) Capital Employed = \69,700 + \59,400 = \129,100 Step 2: Apply the return on capital employed formula. Return on Capital Employed = Net ProfitCapital Employed × 100\% Return on Capital Employed = (\40,000)/(\129,100) × 100\% = 0.3098 × 100\% = 30.98\% The return on capital employed is 30.98\%. Send me the next one 📸

Accepted Answer · 2026-06-18T12:15:05.090Z

Here are the calculations based on the provided financial statements: 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: Apply the gross profit margin formula. Gross Profit Margin = Gross ProfitSales × 100\% Gross Profit Margin = (\190,650)/(\418,350) × 100\% = 0.4557 × 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: Apply the current ratio formula. 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: Apply the acid test ratio formula. 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: Determine the capital employed. Capital employed can be calculated as Fixed Assets + Working Capital, or as Total Equity + Non-current Liabilities. In this case, the closing capital (equity) is given as 129,100. Capital Employed = Fixed Assets + (Current Assets - Current Liabilities) Capital Employed = \69,700 + (\101,150 - \41,750) Capital Employed = \69,700 + \59,400 = \129,100 Step 2: Apply the return on capital employed formula. Return on Capital Employed = Net ProfitCapital Employed × 100\% Return on Capital Employed = (\40,000)/(\129,100) × 100\% = 0.3098 × 100\% = 30.98\% The return on capital employed is 30.98\%. Send me the next one 📸

The following information were extracted from the books of Toyebi Ltd. You are required to calculate: (a) Rate of stock turnover; (b) Gross profit margin; (c) Current ratio; (d) Acid test ratio; (e) Return on capital employed.

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The following information were extracted from the books of Toyebi Ltd. You are required to calculate: (a) Rate of stock turnover; (b) Gross profit margin; (c) Current ratio; (d) Acid test ratio; (e) Return on capital employed.

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