The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008: Actual results Budgeted results Previous year Industry average Current ratio 1.97 1.92 1.87 1.92 Quick asset ratio 1.06 1.06 1.06 1.11 Inventory turnover 4.21 4.91 4.86 4.76 Net profit ratio 0.05 0.03 0.03 0.03 Gross margin 0.65 0.59 0.61 0.61 Required: Provide four (4) possible explanations for the results for the various ratios for Solar Ltd and outline their implications for the audit.
The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008: Actual results Budgeted results Previous year Industry average Current ratio 1.97 1.92 1.87 1.92 Quick asset ratio 1.06 1.06 1.06 1.11 Inventory turnover 4.21 4.91 4.86 4.76 Net profit ratio 0.05 0.03 0.03 0.03 Gross margin 0.65 0.59 0.61 0.61 Required: Provide four (4) possible explanations for the results for the various ratios for Solar Ltd and outline their implications for the audit.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter6: Accounting For Merchandising Businesses
Section: Chapter Questions
Problem 7PEA: Financial statement data for years ending December 31 for Latchkey Company follows: a. Determine the...
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The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008:
Actual
results
Budgeted
results
Previous year Industry average
Quick asset ratio 1.06 1.06 1.06 1.11
Inventory turnover 4.21 4.91 4.86 4.76
Net profit ratio 0.05 0.03 0.03 0.03
Gross margin 0.65 0.59 0.61 0.61
Required:
Provide four (4) possible explanations for the results for the various ratios for Solar Ltd and outline
their implications for the audit.
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