Frozen Limited | Tarzan Limited | ||||
Closing Inventory | $ 10,300 | $ 9,500 | |||
Trade Receivables | $ 3,800 | $ 2,300 | |||
Total Current Assets | $ 16,300 | $ 13,400 | |||
Trade Payable | $ 4,600 | $ 4,500 | |||
Total Current Liabilities | $ 6,920 | $ 7,810 | |||
Sales | $ 62,500 | $ 58,900 | |||
Cost of Sales | $ 50,100 | $ 51,300 | |||
Gross Profit | $ 12,400 | $ 7,600 | |||
Profit before tax | $ 4,600 | $ 1,900 | |||
a) | Frozen Limited | Tarzan Limited | |||
i | Gross Margin ratio | Gross Profit/ Net Sales*100 | 19.84% | 12.90% | |
ii | Profit Margin (before tax) | Profit Before tax / Net Sales *100 | 7.36% | 3.23% | |
iii | Quick ratio | Quick Asset/ Total Current Liability | 0.87 | 0.50 | : 1 |
iv | Trade receivables collection period | Trade Receivables/Net Credit Sales * 365 | 22.19 | 14.25 | days |
v | Inventory Turnover | Ending Inventory/Cost of Sales *365 | 75.04 | 67.59 | days |
Quick Assets | Total Current Assets-Closing inventory | $ 6,000 | $ 3,900 |
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b) Profitability and Inventory management
Frozen Limited has better profitability ratio than Tarzan Limited. Frozen limited have 7.36% profit margin over sales, but Tarzan limited have only 3.23% profit margin over sales.
The decline of the inventory turnover (days) value during the year is a positive trend for the company. It means that less funds are being distracted to form the inventories.Here Tarzan Limited has more efficient inventory management than Frozen Limited
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23:38 < EA Qn BUS3006 Assignment (TM) ☺ A2. The following data are extracted from the...
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