Accounting for Managers: Interpreting accounting information for decision-making

QUESTIONS 385

c A business with a financial year of 1 April/31 March purchases a new com-
puter network server for £12,000 on 30 June. The business depreciates computer
hardware at the rate of 20% of cost per annum, beginning the month follow-
ing purchase.

6.6 Jones and Brown Retail Stationery sells its products to other businesses. It
has provided the following information:

Sales £1,200,000

Cost of sales £450,000

Inventory at end of year £200,000

Debtors at end of year £200,000

Creditors at end of year £100,000

Using 250 days as the number of days the business is open, calculate:

žthe days’ sales outstanding;
žthe stock turnover; and
žthe days’ purchases outstanding.

Questions for Chapter 7

7.1 Following are the accounts for Drayton Ltd (Tables A1.1 and A1.2).
Calculate the following ratios for Drayton for both 2001 and 2000:

Table A1.1 Drayton Ltd Profit and Loss account

for the year ended 31 December

In £mill 2001 2000

Turnover 141.1 138.4

Net operating costs −113.9 −108.9

Operating profit 27.2 29.5

Non-operating income 1.4 1.3

Interest payable −7.5 −8.8

Profit before tax 21.1 22.0

Tax on profit −7.3 −5.7

Profit after tax 13.8 16.3

Dividends −8.0 −8.0

Retained profit 5.8 8.3