Jim Crow’s Sporting Goods StoreP&L Statement for the year ended on 31 st December 2014

Note: Credit sales are 30% of total net sales revenue.

REVENUESales Revenue 164900Less: Sales Return 850Net Sales 164050

COST OF GOODS SOLDCost of goods Sold 74800Custom duty 1800 76600

Gross Profit 87450Add: Service Revenue 7600

Adjusted Gross Profit 95050

EXPENSESa) SellingSales Staff Salary 35600Depreciation – Delivery Vehicle 7500 43100

b) General/administrativeUtility Expense 2900Office Expense 15700Rent Expense 5400 24000

c) FinancialInterest Expense 800Bad Debt 402 1202

Total operating expenses 68302

NET PROFIT/(LOSS) 26748

Jim Crow’s Sporting Goods StoreBalance Sheet as at 31 st December 2014

O/E from 2013 is $65950; debtor of 2013 is $23800; inventory of 2013 is $43750.

Owner’s EquityCapitalAdd: Net ProfitLess: Drawings

Represented by:Current Assets CashAccrued Service RevenuePrepaid Rent ExpenseDebtor Inventory

Fixed Assets Delivery VehicleLess: Accumulated depreciationFurniture

Total Assets

Current LiabilitiesCreditor

Deferred Liabilities Loan

Total Liabilities

Net Assets

$

88901400100

1784851810

52000(29500)36550

$

80048

59050

16800

42000

$

6595026748

(12400)80298

139098

58800

80298

Profitability Ratios 2013 2014 Interpretation

Return on Equity(ROE)

28.6%

26748 / 73124x 100%

=36.6%

During the 2013 to 2014 period, the ROE has increased from 28.6% to 36.6%. This means that the owner is getting more return from his/her capital than last year.

Net Profit Margin (NPM)

13%

26748 / 164050x 100%

=16.3%

During the 2013 to 2014 period, the NPM has increased from 13% to 16.3%. This means that the business is getting better at controlling its overall expenses.

Gross Profit Margin (GPM)

47%

87450 / 164050x 100%

=53.3%

During the 2013 to 2014 period, the GPM has increased from 47% to 53.3%. This means that the business is getting better at managing its COGS.

Selling Exp. Ratio (SER) 27.2%

43100 / 164050x 100%

=26.3%

During the 2013 to 2014 period, the SER has decreased from 27.2% to 26.3%. This means that the business is getting better at controlling its selling expense.

General Exp. Ratio (GER) 5.8%

24000 / 164050x 100%

=14.6%

During the 2013 to 2014 period, the GER has increased from 5.8% to 14.6%. This means that the business’ ability to control its general expense has worsened.

Financial Exp. Ratio (FER)

1%

1202 / 164050x 100%

=0.73%

During the 2013 to 2014 period, the FER has decreased from 1% to 0.73%. This means that the business is getting better at controlling its financial expense.

Profitability Ratios 2013 2014 Interpretation

Working Capital 3.03: 1

80048:16800

4.76:1

During the 2013 to 2014 period, the WCR has increased from 3.03:1 to 4.76:1. This means that the business’ ability to pay current liabilities using current assets is getting better. In addition, this satisfied the minimum requirement of 2:1.

Total Debt 47.3%

58800 / 139098x 100%

=42.3%

During the 2013 to 2014 period, the TDR has decreased from 47.3% to 42.3%. This means that the business’ overall liabilities has reduced, and in addition, it does not satisfy the maximum 50% limit.

Stock Turnover 270 days

365 ÷(76600 / 47780)

=228 days

During the 2013 to 2014 period, the ITR has decreased from 270 to 228 days. This means that the business is selling its product at a faster rate.

Debtor Turnover 54.8 days

365 ÷(49215 / 20824)

=154 days

During the 2013 to 2014 period, the DTR has increased from 54.8 to 154 days. This means that the business is collecting its debt at a slower rate.

Interest Coverage 16 times

(800 + 26748) /800

=34.4%

During the 2013 to 2014 period, the ICR has increased from 16 to 34.4 times. This means that the business ability to pay its interest expense has become better. In addition, the business’ ICR has satisfied the minimum requirement of 5 times.