The Following Financial Statements Are for Sioux Appliances,a Sole Trader,for

question 16

Essay

The following financial statements are for Sioux Appliances,a sole trader,for the years ending 31 March 20X3,20X4 and 20X5.
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Other information:
20X2 Accounts receivable were 52,000
20X2 Inventory were 19,000
20X2 Total assets were 360,000
20X2 Sales were 490,000
The bank overdraft limit is $20,000.
The mortgage is due for repayment in 20X7.
a Give a brief explanation of what each of the following ratios measure or mean: (You are not required to interpret the results from the financial statements at this point. )
i Net profit %,Return on equity %
ii Inventory turnover (days),Accounts receivable turnover (days)
iii Liquidity ratio (= Quick ratio),Debt ratio %.
b Calculate the following ratios for the 20X5 year.Show your calculations.
i Gross profit %,Net profit %,Return on equity %
ii Inventory turnover,in times per year and in days
iii Accounts receivable turnover,in times per year and in days
iv Current ratio,Liquidity ratio,Debt ratio %.
c Comment on the ratios calculated above,and the financial statement results for Sioux Appliances during the years 20X3-20X5 inclusive,in the following areas:
• profitability
• managerial performance
• financial stability.
d Recommend to Sioux what you consider to be the 6 most important things to do to correct her financial position and performance.

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Definitions:

Frequency of Occurrence

The number of times an event or a value appears in a given dataset or period of time.

Large-sample Z Tests

Statistical tests used to determine if there are differences between the means of two samples when the sample size is large.

Chi-square Statistic

A statistic that measures the difference between observed counts and counts expected under a specific hypothesis, used in tests of independence and goodness-of-fit.

Binomial Proportions

The probabilities of outcomes for a binomial distribution, which describes the number of successes in a fixed number of binary experiments.