Chapter7S - (5thedition AtrillandMcLaney Exercisesolution...

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Financial accounting for decision makers (5th edition) Atrill and McLaney Exercise solution 1 Chapter 7 Crow Ltd Previous year Current year Return on ordinary shareholders funds Profit for the year x 100% Share capital plus reserves (120/231) x 100% 51.95% (60/327) x 100% 18.35% Average settlement period for trade receivables Trade receivables x 365 Credit sales revenue (120/600) x 365 73 days (150/600) x 365 91 days Inventories turnover period Inventories x 365 Cost of sales (165/300) x 365 201 days (195/360) x 365 198 days Current ratio Current assets Current liabilities 294/180 1.6 345/252 1.4 Acid test ratio Current assets ­ less inventories Current liabilities 129/180 0.7 150/252 0.60 Gross profit margin Gross profit x 100% Sales revenue (300/600) x 100% 50.00% (360/600) x 100% 40.00% Operating profit margin Operating profit x 100% Sales revenue (120/600) x 100% 20.00% (60/600) x 100% 10.00% Gearing ratio Total long­term borrowings x 100% Share capital plus reserves + long­term borrowings [300/(231 + 300)] x 100% 56.50% [(450/(327 + 450)] x 100% 57.2% Additional ratios could have been calculated and these might have offered a fuller picture.
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Chapter7S - (5thedition AtrillandMcLaney Exercisesolution...

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