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Finance & Accounting
Pages 5 (1255 words)
Question 1 (part a) Profitability Ratios 2011 2012 Profitability Ratios Gross profit margin 44.00% 45.88% Operating profit margin 8.00% 9.41% Net profit margin 6.67% 7.06% ROA 18.38% 13.95% ROCE 29.27% 29.63% EPS 5.00 6.00 Liquidity and Effeciency ratios 2011 2012 Liquidity Current ratio 1.37 2.88 Acid test ratio 0.81 1.50 Debtors turnover period 14.42 7.08 Creditors turnover period 9.13 12.43 Inventory turnover 11.05 4.18 Capital Ratios 2011 2012 Gearing Ratios Equity ratio 0.75 0.63 Debt ratio 0.25 0.37 Debt : equity ratio 0.75:0.25 0.63:0.37 Part (b) Gross profit margin is an analyzing tool which assists in identifying how effectively and efficiently the company is utilizing its raw m
This presents that fact that the company has been able to maintain its cost of sales and made sure that it remains in constant proportion with the revenue. The company has been able to manage the impact of inflation in the cost of material and labor. The operating profit margin follows the same trend. Net profit margin, on the other hand analyzes the profitability of the company before deducting the taxation and finance charges from the earnings. The ratio is calculated by dividing the profit after interest and tax with the sales revenue of the current financial period. The ratio highlights how well the company is managing its selling and administrative expenses it also highlights the other income generated by the company during the course of its operations. The net profit increased significantly in the financial year 2012 as compared to the financial year 2011. ...
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