Question
Extracts from the financial statements of Northgate Supplies Ltd:
| Income statement, 2026 | Amount |
|---|
| Sales revenue (all on credit) | $520,000 |
| Cost of goods sold | 313,500 |
| Gross profit | 206,500 |
| Income from operations | 56,600 |
| Interest expense | 5,000 |
| Net income | 38,700 |
| Statement of financial position | Dec 31, 2026 | Dec 31, 2025 |
|---|
| Cash | 23,000 | 26,000 |
| Accounts receivable, net | 58,900 | 46,000 |
| Inventory | 69,500 | 54,000 |
| Prepaid insurance | 1,800 | — |
| Total current liabilities | 55,500 | 40,000 |
| Total equity | 181,700 | 138,000 |
Give percentages and ratios to two decimal places, and days to two decimal places using a 365-day year.
Required:
- Gross Profit Margin — as a percentage of sales.
- Return on Equity — net income as a percentage of average equity.
- Inventory Days — average inventory ÷ cost of goods sold × 365.
- Receivable Days — closing net receivables ÷ credit sales × 365.
- Interest Cover — income from operations ÷ interest expense (times).
- Quick Ratio — (cash + net receivables) ÷ current liabilities at December 31, 2026.
Statements in this challenge
- Gross Profit MarginNumeric Answer
- Return on EquityNumeric Answer
- Inventory DaysNumeric Answer
- Receivable DaysNumeric Answer
- Interest CoverNumeric Answer
- Quick RatioNumeric Answer
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
How to approach this
IAS 1 — Presentation of Financial Statements
A composite challenge links several statements built from one set of data, so figures flow between them: profit reaches retained earnings, and the closing balances feed the position statement. Complete them in the order the statements depend on each other rather than the order of the tabs.
Common mistakes
- Preparing each statement independently, so the linking figures disagree.
- Carrying a figure forward before finishing the adjustments that change it.
- Reworking a linked figure in one statement without updating it in the others.
Further readingIAS 1: what goes where in a full set of statements