Juma and Jenala each carry on business as wholesalers of the same product. Their respective accounts for the year ended 31 December 2020 are as follows: Juma Jenala K K K K Sales 144,000 140,000 Cost of sales Opening inventory 28,000 3,200 Purchases 124,000 121,600 152,000 124,800 Closing inventory 32,000 120,000 4,800 120,000 Gross Income 24,000 20,000 Selling expenses 7,200 2,800 Admin expenses 8,160 15,360 9,500 12,300 Net income 8,640 7,700 Balance sheets as at December 2020 Jumbe Jenala K K Freehold property 20,000 14,000 Fixtures and fittings 21,750 13,840 Motor vehicles 12,000 6,000 53,750 33,840 Inventory 32,000 4,800 Debtors 28,800 11,200 Bank 8,950 11,360 123,500 61,200 Capital 108,000 30,800 Creditors 15,500 30,400 123,500 61,200 NOTES: (a) All sales are on credit. (b) The amounts of debtors and creditors have not changed significantly over the year. (c) All non-current assets are net of accumulated depreciation. REQUIRED: Compare the profitability and financial position of the two businesses by: (a) Calculating suitable ratios for each business; (b) Commenting on the significance of the results of your calculations.
Juma and Jenala each carry on business as wholesalers of the same product. Their respective accounts for the year ended 31 December 2020 are as follows:
Juma Jenala
K K K K
Sales 144,000 140,000
Cost of sales
Opening inventory 28,000 3,200
Purchases 124,000 121,600
152,000 124,800
Closing inventory 32,000 120,000 4,800 120,000
Gross Income 24,000 20,000
Selling expenses 7,200 2,800
Admin expenses 8,160 15,360 9,500 12,300
Net income 8,640 7,700
Balance sheets as at December 2020
Jumbe Jenala
K K
Freehold property 20,000 14,000
Fixtures and fittings 21,750 13,840
Motor vehicles 12,000 6,000
53,750 33,840
Inventory 32,000 4,800
Debtors 28,800 11,200
Bank 8,950 11,360
123,500 61,200
Capital 108,000 30,800
Creditors 15,500 30,400
123,500 61,200
NOTES:
(a) All sales are on credit. (b) The amounts of debtors and creditors have not changed significantly over the year. (c) All non-current assets are net of accumulated
REQUIRED:
Compare the profitability and financial position of the two businesses by:
(a) Calculating suitable ratios for each business; (b) Commenting on the significance of the results of your calculations.
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