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Exercise Financial Ratio Analysis Below is the trial balance as at 31 March 2007 of Alia who runs a florist.

DR (RM) Capital Bank Cash Stock 1 April 2006 Debtors & Creditors Premise Motor Vehicles Return Inwards and Outwards Salaries Water & Electricity General Expenses Commission Received Insurance Purchases & Sales Additional information: 1. Stock as at 31 March 2007 was valued at RM25,000. 81,250 10,550 38,000 60,000 130,000 82,500 20,000 120,000 26,000 6,450 24,000 179,250 778,000 CR (RM) 251,900

29,450 4,150

2,500 490,000 778,000

2. Accrued insurance and accrued commission received as at 31 March 2007 is RM4,000 and RM2,000 respectively. 3. Industry average: Gross profit ratio Net profit ratio Current ratio Acid test ratio Stock turnover ratio Required: a. Calculate the following ratios for the business: i. ii. iii. iv. v. b. c. Gross Profit Ratio Net Profit Ratio Current Ratio Acid Test Ratio Stock Turnover Ratio (12 marks) Compare and comment your findings with industry average. (5 marks) If everything remained unchanged, but, cost of goods sold increased by 15%, calculate the percentage of increase or decrease on net profit ratio of the business. (3 marks) (Total: 20 marks) 30% 15% 2.5% 1.5% 8 times.

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