Topic 3.6: Efficiency Ratios Questions

A clothing retailer’s stock turnover (number of times) ratio has fallen from 8 times to 5 times in two years. Explain what this fall suggests about the retailer.

A retailer had average stock of $90 000 and cost of sales of $540 000 for the year. Calculate the retailer’s stock turnover (number of days) ratio (show all your working).

Table 1 shows selected financial information for Nordic Knit for the year ended 31 December 2025 (all figures in $000s). | Item | Figure | |---|---| | Cost of sales | 730 | | Debtors | 96 | | Sales revenue | 1 460 | | Stock | 150 | | Trade creditors | 88 | Using Table 1, calculate Nordic Knit’s debtor days (number of days) ratio for 2025 (no working required).

Table 1 shows selected financial information for Greenleaf Grocers for the year ended 31 December 2025 (all figures in $000s). | Item | Figure | |---|---| | Cost of sales | 5 110 | | Sales revenue | 6 400 | | Stock | 210 | | Trade creditors | 350 | Using Table 1, calculate Greenleaf Grocers’ creditor days (number of days) ratio for 2025 (no working required).

Pellow Roofing Ltd has non-current liabilities of $120 000 and equity of $160 000. Calculate the gearing ratio for Pellow Roofing (no working required).

Table 1 shows selected financial information for Brightwave Solar for the year ended 31 December 2025 (all figures in $ millions). | Item | Figure | |---|---| | Cash | 40 | | Cost of sales | 500 | | Debtors | 131 | | Sales revenue | 820 | | Trade creditors | 70 | Using Table 1, calculate Brightwave Solar’s debtor days (number of days) ratio for 2025 (no working required).

A firm’s debtors stand at $48 000 and its sales revenue for the year was $400 000. Calculate the firm’s debtor days ratio (number of days) (show all your working).

Pinecrest Furniture Ltd makes oak tables and chairs in a factory it bought with a mortgage. Table 1: Selected financial information for Pinecrest Furniture for 2025 (all figures in $) | Item | Figure | |---|---| | Sales revenue | 2 400 000 | | Cost of sales | 1 500 000 | | Debtors | 320 000 | | Non-current liabilities | 1 200 000 | Pinecrest Furniture’s capital employed at the end of 2025 was $1 600 000. Using the data in Table 1, calculate the gearing ratio for Pinecrest Furniture (no working required).

A shop’s cost of sales for the year is $310 000 and its average stock is $62 000. Calculate the shop’s stock turnover (number of times) ratio (no working required).

Brookside Garden Centre owes its bank and its suppliers $2 million that it has no way of repaying. Define the term bankruptcy.

Brightwave Solar Ltd installs solar panels on the roofs of family homes. Table 1: Selected financial information for Brightwave Solar for 2025 (all figures in $) | Item | Figure | |---|---| | Sales revenue | 6 500 000 | | Debtors | 900 000 | | Trade creditors | 400 000 | | Borrowings (long-term) | 1 100 000 | Brightwave Solar’s capital employed at the end of 2025 was $5 000 000. Using the data in Table 1, calculate the gearing ratio for Brightwave Solar (no working required).

Table 1 shows selected financial information for Ferro Tools for the year ended 31 December 2025 (all figures in $000s). | Item | Figure | |---|---| | Cost of sales | 2 190 | | Debtors | 450 | | Sales revenue | 3 650 | | Stock | 300 | | Trade creditors | 240 | Using Table 1, calculate Ferro Tools’ debtor days (number of days) ratio for 2025 (no working required).

A manufacturer owes its trade creditors $62 000. Its cost of sales for the year was $372 000. Calculate the manufacturer’s creditor days ratio (number of days) (show all your working).

Harbourside Marina Ltd rents berths to boat owners and runs a repair yard beside them. Table 1: Selected financial information for Harbourside Marina for 2025 (all figures in $) | Item | Figure | |---|---| | Sales revenue | 1 800 000 | | Cost of sales | 600 000 | | Debtors | 150 000 | | Loans (long-term) | 900 000 | Harbourside Marina’s capital employed at the end of 2025 was $3 000 000. Using the data in Table 1, calculate the gearing ratio for Harbourside Marina (no working required).

Table 1 shows selected financial information for Volta Scooters for the year ended 31 December 2025 (all figures in $ millions). | Item | Figure | |---|---| | Bank overdraft | 20 | | Cost of sales | 420 | | Debtors | 150 | | Sales revenue | 700 | | Trade creditors | 69 | Using Table 1, calculate Volta Scooters’ creditor days (number of days) ratio for 2025 (no working required).

Castlegate Builders Ltd has non-current liabilities of $480 000 and capital employed of $1 200 000. Calculate the gearing ratio for Castlegate Builders (show all your working).

Table 1 shows selected financial information for Atlas Furniture for the year ended 31 December 2025 (all figures in $000s). | Item | Figure | |---|---| | Cost of sales | 960 | | Debtors | 200 | | Sales revenue | 1 500 | | Trade creditors | 150 | Using Table 1, calculate Atlas Furniture’s creditor days (number of days) ratio for 2025 (no working required).

Kiln Street Pottery has not paid its clay supplier or its landlord for three months, and its bank account is empty. Define the term insolvency.

Distinguish between insolvency and bankruptcy.

Harvest Table Foods (HTF) makes ready meals for supermarkets. In 2026 it plans to take a new long-term loan of $90 million to open a second factory. Table 1: Selected financial information for Harvest Table Foods as at 31 December 2025 (all figures in $ millions) | Item | Figure | |---|---| | Borrowings (long-term) | 120 | | Retained earnings | 160 | | Share capital | 200 | Explain how HTF’s gearing ratio would change if HTF received the new long-term loan.