Bread Zeppelin

Bread Zeppelin – Question 1

Bread Zeppelin Gross Profit Margin Acid Test Ratio As cost of sales is 60% of sales revenue, gross profit margin must be 40% Cost of sales = £280,000 X 0.6 = £168,000 Gross profit = £280,000 - £168,000 = £112,000 Gross profit margin = (£112,000 / £280,000) x 100 = 40% Inventory = (£180,000 / 5) x 3 = £108,000 Acid Test Ratio = (£180,000 - £108,000) / £80,000 = 0.9:1

Bread Zeppelin Return on Capital Employed Gearing Operating profit = £28,000 ROCE = £28,000 / (£90,000 + £50,000) x 100 ROCE = £28,000 / £140,000 x 100 = 20% Gearing = £50,000 / (£90,000 + £50,000) x 100 Gearing = £50,000 / £140,000 x 100 = 35.71

Bread Zeppelin – Question 2

Bread Zeppelin – Question 2 New Gearing (based on the proposed expansion) Gearing = £150,000 / (£90,000 + £150,000) x 100 Gearing = £150,000 / £240,000 x 100 = 62.5%