ACC117/106/PROJECT2/OCTFEB2022

ACC117/106: GROUP PROJECT 2

CARRY MARK: 15%
TOTAL MARKS: 50

INTRODUCTION:
In this group assignment, a group of students are expected to analyse financial
statements using simple financial ratios for sole proprietorship business.

INSTRUCTIONS:
1. Form a group with a maximum of 4 members.
2. Answer all questions.

QUESTION 1

The following are the final accounts of AKB Enterprise for the year ended 30 June 2020
and 2021:

AKB Enterprise
Statement of Profit or Loss for the year ended 30 June 2020 and 2021
2020 2021
Sales 100,000 120,000
Less: Sales Return (3,200) (1,200)
Net Sales 96,800 118,800

Less: Cost of Goods Sold

Opening Inventory 25,200 12,000
Add: Purchases 34,800 24,500
60,000 36,500
Less: Closing Inventory (12,000) (48,000) (12,500) (24,000)
Gross profit 48,800 94,800
Add: other revenues 60,000 36,000
Less: Expenses (14,200) (44,200)
Net Profit 94,600 86,600
 ACC117/106/PROJECT2/OCTFEB2022

AKB enterprise
Statement of Financial Position as at 30 June 2020 and 2021
2020 2021
Non-current Assets 169,000 187,000
Current Assets:
Inventory 12,000 12,500
Account Receivable 11,400 33,500
Bank 6,000 9,500
Prepaid expense - 1,000
29,400 56,500
198,400 243,500
Financed by:
Capital 146,400 146,400
Add: Net Profit 94,600 187,000 86,600 233,000

Current Liabilities 11,400 10,500

198,400 243,500

Required:

Based on the financial statements for the year ended on 30 June 2020 and 2021 given,
you are required to:

i) Calculate for both years:

a. Current ratio
b. Acid-test ratio
c. Gross profit margin
d. Net profit margin
e. Return on investment
f. Inventory turnover ratio
g. Average collection period (Assume there are 365 days in a year)
(30 marks)

ii) Interpret each of the ratios for both years.

(14 marks)

iii) Compare and contrast the liquidity ratios, profitability ratios and efficiency ratios
for both years.
(6 marks)
(Total: 50 marks)

END OF QUESTION PAPER