Analysis

Question 1

Mark-up percentage of 150%

Answer 1

On average the business adds 150% of the cost price of the inventory on to the cost price to calculate the selling price. For example…

Question 2

Gross profit percentage of 75%

Answer 2

For every $1 of sales, the business will earn 75 cents in gross profit. The remaining 25 cents is subtracted as the cost of goods sold. The 75 cents will be used to cover expenses

Question 3

Distribution cost percentage of 25%

Answer 3

For every $1 of sales for the business, 25 cents is spent on distribution costs such as advertising

Question 4

Administrative expenses of 35%

Answer 4

For every $1 of sales for the business, 35 cents is spent on administrative costs such as office electricity

Question 5

Finance costs of 15%

Answer 5

For every $1 of sales for the business, 15 cents is spent on finance costs such as interest on loan

Question 6

Profit for the year percentage of 30%

Answer 6

For every $1 of sales the business will earn 30 cents in profit for the year after all expenses are covered

Question 7

Percentage change of 20%
$100,000 -> 2024 and $120,000 -> 2025

Answer 7

The business sales have increased by 20% from $100,000 in 2024 to $120,000 in 2025

Question 8

Current ratio of 1.30 : 1

Answer 8

The business has $1.30 of current assets for every $1 of current liabilities to meet their current debts as they fall due in the next 12 months. This means that the business should be able to meet their short-term debts

Question 9

Liquid ratio of 1.40 : 1

Answer 9

The business has $1.40 of liquid assets for every $1 of liquid liabilities. This means that the business should be able to meet all their immediate debts as they fall due during the next 4 to 6 weeks

Question 10

Equity ratio of 0.30 : 1

Answer 10

For every $1 of assets, Owner has financed 30 cents and has borrowed 70 cents from external sources, meaning he has funded less of the business assets than external sources