Interpretation of Accounts The following information has been taken from the accounts of Logan Ltd for the year ended 31/12/2019: Trading and Profit and Loss Account for the year ended 31/12/2019 Credit sales € 690,000 Less: Cost of sales Stock 01/01/2019 40,000 Add: credit purchases 582,000 Less: stock 31/12/2019 30,500 Gross profit ???? Less: total expenses (including interest) ?? Net profit for the year 35,500 Balance Sheet as at 31/12/2019 Cost € Depreciation € NBV € Fixed Assets 860,000 ? 790,000 Current Assets (including trade debtors €50,000) 105,000 Less creditors: amounts falling due within 1 year Trade creditors (45,500) 59,500 Financed by: Creditors: amounts falling due after more than 1 year 6% Debentures (2024/2025) 200,000 Capital and Reserves Authorised Issued Ordinary shares at €1 each 900,000 596,000 596,000 Profit and loss account 849,500 (a) You are required to calculate (to two decimal places where appropriate): (i) The gross profit margin - Leaving Cert Accounting - Question 5 - 2020

The acid test (or quick) ratio measures a company's ability to cover its current liabilities without relying on inventory sales. It is calculated as follows:

This shows the company has enough liquid assets to cover its current liabilities.

To determine the period of credit given to debtors, we use the following formula:

To determine how many more shares Logan Ltd can issue, we subtract the issued shares from the authorized shares:

Debentures are long-term loans. Logan Ltd has issued 6% debentures due in 2024/2025, which means they will need to repay this amount during the stated year. The interest rate of 6% indicates the annual payment the company must make on this debt.

Tangible fixed assets are physical assets that can be touched or seen. Examples include buildings and machinery. Logan Ltd has tangible fixed assets worth €860,000, with a net book value of €790,000 after depreciation.

Shareholders' funds represent the equity capital held by shareholders, including retained earnings and share capital. In Logan Ltd, the shareholders’ funds are €649,500, which includes the initial investment and retained earnings.

Trade creditors are amounts owed to suppliers for goods and services purchased on credit. In this case, Logan Ltd has trade creditors amounting to €45,500, indicating pending payments to its suppliers.

To assess whether Logan Ltd would struggle to meet its short-term obligations, we look at the acid test ratio calculated previously (1.64). Since this ratio is above 1, it indicates that the company has sufficient liquid assets to cover its liabilities, suggesting that it should not face difficulty in paying its bills as they come due.

The return on capital employed (ROCE) for Logan Ltd is calculated using the formula:

The return on capital employed has decreased from 10% in 2018 to approximately 4.18% in 2019. This indicates a decline in the efficiency of using capital to generate profits. A decrease of about 1.82% suggests the business is less profitable year-over-year, which could raise concerns about operational efficiency and profitability in the future.