Interpretation of Accounts The following information has been taken from the accounts of Springfield Ltd for the year ended 31/12/2014: Trading and Profit and Loss Account for the year ended 31/12/2014 Credit Sales € Less: Cost of Sales Stock 01/01/2014 28,000 Add: Credit Purchases 348,000 Less: Stock 31/12/2014 16,000 Cost of Sales 380,000 Gross Profit 260,000 Less: Total Expenses (including interest paid €7,200) 112,000 Net Profit for year 148,000 Balance Sheet as at 31/12/2014 Cost Depreciation NBV Fixed Assets 950,000 30,900 920,100 Current Assets (including Trade Debtors 32,000) 74,000 Less: Creditors: amounts falling due within 1 year Trade Creditors 46,000 28,000 Financed by: Creditors: amounts falling due after more than 1 year 80,000 96% Debentures (2021/2022) Capital and Reserves Ordinary Shares at €1 each 800,000 720,000 Profit and Loss Account 948,000 You are required to calculate: (to 2 decimal places where appropriate,) (i) The Gross Profit margin - Leaving Cert Accounting - Question 5 - 2015

The Rate of Stock Turnover is calculated using the formula:

First, we need to compute the Average Stock:

Now we can substitute the values:

This means that the inventory was sold and replaced approximately 17 times during the year.

Return on Capital Employed (ROCE) can be calculated using:

Plugging the values into the formula:

This value helps measure the efficiency of a company’s capital utilization.

To determine how many more shares Springfield Ltd can issue or sell, we look at the number of shares already issued and the authorized share capital:

Thus, Springfield Ltd can issue or sell 80,000 more shares.

Debentures are long-term loans that a company takes out. They carry a fixed annual rate of interest, which in this case is 9%. The 9% Debentures for Springfield Ltd are due for repayment in the financial years 2021/2022, amounting to €80,000.

Trade Debtors represent amounts owed by customers for goods sold on credit. Springfield Ltd has a trade debtor balance of €32,000, indicating that this is the amount they expect to receive from customers in the near future.

Depreciation is the reduction in value of Fixed Assets over time. A business will account for depreciation as an expense, and Springfield Ltd's depreciation expense for the year is €30,900, reflecting the loss in value of its fixed assets over time.

Interest Paid refers to the extra money paid to lenders to cover the cost of borrowing. For Springfield Ltd, the interest paid is €7,200, at a fixed rate of 9%, reflecting the cost of utilizing borrowed funds.

The Acid Test Ratio assesses a company's short-term liquidity, ensuring it can cover immediate liabilities without relying on inventory. It is calculated as follows:

In this case:

Current Assets = €74,000, Inventories = €16,000, Current Liabilities (Trade Creditors) = €28,000.

Substituting in:

This indicates that Springfield Ltd has €2.07 in liquid assets for every €1 of liabilities.

In 2013, the Return on Capital Employed was recorded at 19%. However, in 2014 it has decreased to 16.37%. This decline suggests that Springfield Ltd is facing challenges in effectively utilizing its capital, ultimately affecting profitability. While a return of 16.37% is still acceptable, it implies potential risk to investors and warrants further investigation into the company’s operations and financial management.