384 ACCOUNTING FOR MANAGERS
6.2 Vibro PLC has fixed assets of £250,000, current assets of £125,000, long-term
debt of £125,000 and creditors payable within 12 months of £75,000.žWhat is the working capital?
žWhat is the capital employed in the company?
žWhat is the shareholders’ capital?6.3 XYZ Ltd’s Profit and Loss account shows the following:2001 2000
Sales 1,250,000 1,175,000
Cost of sales 787,000 715,000
Selling and admin. expenses 324,000 323,000Based on these figures, which of the following statements is true?a Sales, cost of sales and expenses haveall increased, therefore profit, gross margin
and operating margin have all increased.
b The operating profit has increased due to sales growth, higher gross margins
and similar expenses.
c Although the operating profit has decreased, the operating margin has increased
as a result of sales growth and an increase in gross profit.
d The operating profit has decreased due to lower gross margins and higher
expenses, despite sales growth.
e Although the operating profit has increased, the operating margin has decreased
as a result of a reduction in the gross margin and higher expenses, despite
sales growth.
6.4 National Retail Stores has identified the following data from its accounting
records for the year ended 31 December: sales £1,100,000; purchases £650,000;
expenses £275,000. It had an opening stock of £150,000 and a closing stock
of £200,000.
Calculate the:žgross profit; and
žoperating profit.6.5 What is the impact of the following prepayment, accrual and provision
transactions on profit, the Balance Sheet and cash flow?a A business has 24 motor vehicles that it leases in return for a monthly pay-
ment, excluding insurance. The company’s financial year is 1 April/31 March,
but the annual insurance premium of £400 per vehicle for the calendar year
January – December is due for payment on 31 December.
b A business budgets for energy costs of £6,000 per annum over its financial year
1 January/31 December. Bills for usage are sent each quarter on the last days of
each of February, May, August and November. Historically, 70% of the annual
energy cost is spent during the autumn and winter (September – February).