Dr. Foo Manchu's Pet Store P&L and Balance Sheet Ratios
1. The following is a P&L statement of Dr. Foo Manchu’s Pet Store for the financial year
2014. Calculate the relevant ratios on the next page and then interpret the results
Dr. Foo Manchu’s Pet Store
P&L Statement for the year ended 31st
December 2014
Revenue
Sales
Less: Sales Return
Net Sales
Cost of Goods Sold
Add: Cost of Goods Sold
Freight Inwards
Gross Profit
Selling Expenses
Advertising
Sales Wages
Promotion
Admin. Expenses
Insurance
Rent
Electricity
Financial Expenses
Interest on Loan
Net Profit/(Loss)
$
2960
6460
500
375
3600
560
$
48510
1100
9920
4535
1750
$
74000
1030
72970
49610
23360
16205
7155
Additional Information
1) Total owner’s equity for the years 2013 and 2014 are $30,200 and $35,600
respectively.
2) Credit sales for the year 2014 is 50% of net sales.
2. Complete the following calculations and interpret the trends from the 2013-2014 periods.
(Tip: Put a next to ratio experiencing an increase and a next to a decreasing ratio.
This is to avoid confusion while interpreting the ratio.)
Profitability
Ratios 2013 2014 Interpretation
Return on Equity
(ROE) 18.5%
Net Profit
Margin (NPM) 6.7%
Gross Profit
Margin (GPM) 34%
Selling Exp.
Ratio (SER) 16.5%
General Exp.
Ratio (GER) 8.8%
Financial Exp.
Ratio (FER) 2%
3. The following is a Balance Sheet of Dr. Foo Manchu’s Pet Store during the same
financial period. Calculate the relevant ratios on the next page and then interpret the
results.
Dr. Foo Manchu’s Pet Store
Balance Sheet as at 31st
December 2014
Owner’s Equity
Capital
Add: Net Profit
Less: Drawings
Total O/E
Represented by:
Current Assets
Debtors
Inventory
Prepaid Insurance
Accrued Dividend
Non – Current Assets
Land & Office Buildings
Long-Term Govt. Bonds
Total Assets
Current Liabilities
Bank Overdraft
Creditors
Prepaid Commission
Accrued Rent
Deferred Liabilities
Mortgage
Total Liabilities
Net Assets
$
4760
3440
525
150
62000
23145
1870
7050
900
600
$
8875
85145
10420
48000
$
30200
7155
1755
35600
94020
58420
35600
Additional Information
1) Debtors balance for 2013: 5490; inventory balance for 2013: 3755.
4. Complete the following calculations.
(Tip: Put a next to ratio experiencing an increase and a next to a decreasing ratio.
This is to avoid confusion while interpreting the ratio.)
Stability
Ratios 2013 2014 Interpretation
Working Capital
1.03: 1
Total Debt
80.2%
Stock Turnover
29.2 days
Debtor Turnover
24.8 days
Interest
Coverage 2.5 times
