Calculation of Ratios Expense to Sales The expense to sales ratio considers how the expenses incurred by the business

compare to its revenues and measures how profitable the business is. Formula: Total Expenses /Net Sales*100% JUNE $85,650/$357,000*100% =23.9% JULY $146,657/$350,900*100% =41.8% NARRATION:

Acid Test Ratio The acid test ratio indicates whether the company has enough short term assets to meet its immediate liabilities without selling inventory. Formula: (Current Assets - Closing Stock)/Current Liabilities JUNE $680,600 - $20,000/$190,000 =3.5:1 JULY $695,193 - $30,000/$330,000 =2:1 NARRATION:

Stock Turnover Ratio The stock turnover ratio indicates how many times a company's inventory is sold and replaced over a period. Formula: Cost of Goods Sold/Average Stock JUNE $571,400/$110,000 =5.2 times JULY $136,000/$25,000 =5.4 times NARRATION: The store has become very efficient, whereas it has sold stock quickly for both months.

Net Profit to Sales Ratio The net profit to sales ratio measures a company's profitability, and this aids the management of the business to analyze the companys performance. Formula: Net Profit/Sales*100% Net Profit to Sales Ratio for the month of JUNE ($297,300)/$357,000*100% =-83.3%

JULY $68,993/$350,900*100% =19.7% NARRATION:

Current Ratio The current ratio measures a company's ability to meetits short-term obligations. Formula: Current Assets/Current Liabilities August $680,600/$190,000 =3.6:1 September $695,193/$330,000 =2.1:1 NARRATION: Liquidity was fairly good for June but no profitability measure was put in place to make use of its excess working capital so it decreased in July.

Performance of the Business T. Wedderburn Dance Accessory Store during the month of June, unfortunately was unable to maximize sales and therefore suffered losses amounting to ($297,300) and according to the net profit to sales ratio a loss of -83.3%. Although the expense to sales ratio was low and should have indicated higher profitability, the current ratio revealed that the business had too much cash in hand and had not been wise in putting in place measures where the money can be invested so as to make more money. This means that the business had not benefited from interests it would have enjoyed if it had invested the money and also the business would not have been able to be sustained or adapt to an economic change. Finally, the acid test ratio was at a high of 3.5:1 which indicates that the company is liquid; however it was not favorable to the business as the company had idle current assets which could have been used to create additional projects. Therefore, the company received no profits. On the other hand in the month of July, the owners of the company were careful enough to not allow a repeat of what happened in the previous month as sales were maximized to 19.7% and the companys net profit amounted to $68,993. The acid test and current ratios declined which indicates that there were marked improvementsin how the company was managing its current assets and these current assets exceeded its debts. The marginal increase of 5.4:1 in the stock turnover ratio compared to 5.2:1 means that the company is efficiently managing and selling its inventory. Finally, despite the expenses and sales for July being higher than June, there were no returns to the firm and the cost of sales decreased resulting in a gross profit of $214,900. The company now has a capital of $837,600.

Aims of the Project To complete the School Based Assessment that is stipulated by the Caribbean Secondary Examination Council so as to achieve the maximum amount of 20% of the final grade of the Principle of Accounts examination. To indicate the level of competence achieved during the prescribed course of studying Principles of Accounts. To identify the benefits of a firm having a stable financial position To reinforce the importance of having accurate financial records.

Expenses to Sales Ratio

$500,000.00 $450,000.00 $400,000.00 $350,000.00 $300,000.00 $250,000.00 $200,000.00 $150,000.00 $100,000.00 $50,000.00 $0.00 Sales Expenses August $350,700.00 $85,650.00 September $350,900.00 $146,657.00

Conclusion I have derived myriads of benefits from completing this exercise. However, the most outstanding benefits include me having the experience of assuming the role of accountant which entails the recording, journalizing, analyzing, and the preparation of financial statements for a business that was considered to be real. In addition, I was able to realize that a business will not always be profitable and so was able to make practical suggestions to improve the business financial position. Finally, I have learnt to display an essential quality and that is patience. This was vital throughout the entire process of doing this exercise but was especially important when doing income statements which at times proved difficult to balance.