Theory question 108
Business CalculationsThe following information was extracted from the books of Lompat Ventures as at December 31, 2022.
₦
Stock as at 01/01/22 37,500
Stock as at 31/12/22 15,000
Goods bought 30,000
Sales 70,000
Wages and Salaries 2,500
Rent and rates 3,500
Transportation 2,600
Debtors 100,000
Creditors 50,000
Bank overdraft 60,000
Cash at bank 25,000
Calculate (i) net profit; (ii) working capital; (iii) rate of stock turnover.
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Cost of sales = 37,500 + 30,000 − 15,000 = ₦52,500
Gross profit = 70,000 − 52,500 = ₦17,500
(i) Expenses = 2,500 + 3,500 + 2,600 = ₦8,600
Net profit = 17,500 − 8,600 = ₦8,900
(ii) Current assets = debtors 100,000 + cash at bank 25,000 + closing stock 15,000 = ₦140,000
Current liabilities = creditors 50,000 + overdraft 60,000 = ₦110,000
Working capital = 140,000 − 110,000 = ₦30,000
(iii) Average stock = (37,500 + 15,000) ÷ 2 = ₦26,250
Rate of stock turnover = 52,500 ÷ 26,250 = 2 times
Find gross profit first, then subtract expenses.