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Transcription of this question: 6.Turnover (GAS)Gross profit (CAS)NetCurrent assets (CAS)Current liabilities (GAS)Stock (CAS)RatiosReturn on Ca ital Em 10ed 0/0)Gross Profit Margin (%)Net Profit Margin (%)Current Ratio (times)Acid Test Ratio (times)Following the loss made by Owganix in 2006, Max and Terry commissioned Seagers, a firmOf accountants, to prepare a detailed report on the financial situation Of the firm. As part Of their reportSeagers looked in detail at each different area of the business and prepared management accounts foreach Of Olganixs separate divisions. The report gave the following information:Farm285 ooo201 80048 ooo73 500682501900021.821.08Farm shop128 ooo75 ooo1800048 ooo39000750015.001.23Restaurant342 ooo18200036 ooo28 500297501200012.200.96The Seagers report also suggested to the firm that they needed to adopt tighter financial controlin order to improve Organix’s financial position. They offered two different options that could beconsidered:• the preparation of budgets and a variance analysis for Olganix as a whole• the separation Of each area Of the business into profit centres.Because Of the administrative burden and costs Of adopting these options, Terry has decided to choosejust one Of them and he is currently considering which one would be the most effective.(a)(b)Calculate the Gross Profit Margin, the Net Profit Margin and the Acid Test Ratiofor the farm, farm shop and restaurant.Explain one possible reason for the difference in the value Of the Gross ProfitMargin for the farm and the restaurant.(i)(ii)Define the term profit centr.Using the figures in the table above and those calculated in part (a),and any Other relevant information from the case study, evaluate both Ofthe options offered by Seagers and suggest which is likely to be the mosteffective at improving the financial position Of Olganix.[6 marks][4 marks][2 marks/[8 marks/

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