Calculate the following ratios for 2018 and 2019

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Reference no: EM133254072

Betty has opened a children bookstore, Beau's Books, in Ballarat for five years. She is interested to know the performance of her business. The statement of financial position and income statement for the year ended 30 June 2018 and 2019 are shown below:

Beau's Books

Statement of Financial Position

As at 30 June

 

2019

2018

 

($)

($)

Assets

 

 

Cash

500

1,000

Accounts receivable

2,000

4,000

Inventory

2,000

3,000

Non-current assets (net)

10,500

12,000

Total assets

15,000

20,000

 

 

 

Liabilities and shareholders' equity

 

 

Accounts payable

2,000

4,000

Long-term borrowings

4,000

6,000

Capital

9,000

10,000

Total liabilities and shareholders' equity

15,000

20,000

Beau's Books

Statement of Financial Position

As at 30 June

 

2019

2018

 

($)

($)

Sales revenue

80000

90000

less: cost of sales

25000

30000

Gross profit

55000

60000

less: operating expenses

20000

30000

less: income tax

10000

12000

Net profit

25,000

18,000

Additional information:

  • Total assets as at 1 July 2017 were $25,000.
  • Total equity as at 1 July 2017 was $15,000.
  • Total inventory as at 1 July 2017 was $4,500.
  • Total Payables as at 1 July 2017 was $2000
  • Total Receivables as at 1 July 2017 was $2000

The industry average of the financial stability ratio for similar businesses is also provided:

debt ratio

45%

assets turnover ratio

4.0

Quick Ratio

1.0

Inventory turnover

6

Current Ratio

2

Required

(a) Calculate the following ratios for 2018 and 2019:

(a) Short term liquidity ratios (any two)

(b) Efficiency Ratios (any two)

(c) Profitability Ratio (any one)  

(b) Make an analysis of the business performance by commenting on the liquidity, Efficiency and profitability performance of the business based on the ratios calculated above in part (a). Make sure that you compare the ratios of this business with the industry average as a part of your analysis of the business performance.

Reference no: EM133254072

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