Question 7 refer to the following figures extracted from the financial statement

Question

Question 7 refer to the following figures extracted from the financial statements of Blunt Ltd.. Sales Cost of sales Profit before interest and tax Fixed assets Depreciation Stock Debtors Cash at bank Creditors Long-term loans 2,700 1,950 300 1,500 150 1,050 750 150 450 What is the quick ratio? b) 2.17:1 c) 0.83:1 d) 3.33:1 e) none of the above What is the net working capital? a) 1,050 b) 1,950 c) 900 d) 0 e) none of the above What is the debtor collection period in days, assuming a 365-day year? a) 63 days b) 101 days c) 140 days d) 122 days e) none of the above What is the gross profit margin? a) 72.2% b) 11.1% c) 27.7% d) 38.5% e) none of the above

Explanation / Answer

Answer 1.

Quick Assets = Cash at Bank + Debtors
Quick Assets = 150 + 750
Quick Assets = 900

Current Liabilities = Creditors
Current Liabilities = 900

Quick Ratio = Quick Assets / Current Liabilities
Quick Ratio = 900 / 900
Quick Ratio = 1.00 : 1

Answer 2.

Current Assets = Cash at Bank + Debtors + Stock
Current Assets = 150 + 750 + 1,050
Current Assets = 1,950

Current Liabilities = Creditors
Current Liabilities = 900

Net Working Capital = Current Assets - Current Liabilities
Net Working Capital = 1,950 - 900
Net Working Capital = 1,050

Answer 3.

Debtor Collection Period = 365 * Debtor / Sales
Debtor Collection Period = 365 * 750 / 2,700
Debtor Collection Period = 101 days

Answer 4.

Gross Profit = Sales - Cost of Sales
Gross Profit = 2,700 - 1,950
Gross Profit = 750

Gross Profit Margin = Gross Profit / Sales
Gross Profit Margin = 750 / 2,700
Gross Profit Margin = 27.7%

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