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2 W Limited provided the following extracts from the financial statements at 31 August 2024.
Statement of profit or loss for the year ended 31 August 2024
$
Sales revenue 720 000
Opening inventory 76 000
Operating expenses 165 000
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Finance costs 20 000
Taxation 16 000
Statement of financial position at 31 August 2024
$
Trade receivables 66 000
Share capital 550 000
Retained earnings 95 000
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8% debentures (2026) 45 000
Current liabilities 37 000
The following information is also available:
• cash sales were 15% of total sales
• the gross profit margin was 35%
• the rate of inventory turnover (times) was 6.4 times.
(a) Calculate the trade receivables turnover (days) for the year ended 31 August 2024 showing
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the formula used.
Formula Calculation
[2]
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(b) Explain the difference between gross profit margin and mark-up.
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(c) (i) State the formula for the rate of inventory turnover (times).
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(ii) Calculate the value of the closing inventory at 31 August 2024.
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(d) Calculate, to two decimal places, the return on capital employed for the year ended
31 August 2024 showing the formula used.
Formula Calculation
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[4]
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Additional information
The directors of W Limited use accounting ratios to compare the company’s progress with other
businesses. They are aware that such comparison should only be made with companies in similar
business sectors but are also aware that such comparison has limitations.
(e) State three other limitations of accounting ratios.
1 ................................................................................................................................................
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2 .................................................................................................................................................
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3 .................................................................................................................................................
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[3]
[Total: 15]
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9706/22/O/N/24 [Turn over
