StudentShare solutions
Triangle menu

The Gross Profit Margin of Mark Equipment Pty Ltd - Essay Example

Nobody downloaded yet

Extract of sample
The Gross Profit Margin of Mark Equipment Pty Ltd

The Gross Income Margin is a financial measure to evaluate an organization’s financial wellbeing by disclosing the percentage of cash left after considering the cost of goods sold into account. The gross income value of an organization serves as the basis for the payment of further expenses and future reserves. The gross income margin of an organization can be calculated as the ratio of its revenue less its cost of sales to its revenue value.
i.e., Gross Income Margin = (Revenue – Cost of Sales)/ Revenue
The cost of sales refers to the direct expenses involved in the manufacturing of the products sold by the organization. The cost of sales value includes the cost of resources utilized in the manufacturing of the products along with the labor expenses utilized in the production of the products. Thus, the cost of sales can be computed as,
Cost of Sales = Opening Stock + Purchases – Closing Stock
The computation of the cost of sales of a company does not comprise of any indirect costs involved in the process of sale of the products. Thus, the repair and maintenance charges, costs of depreciation of tools and equipments, rent expenditure, wages and charges of water and electricity have been excluded from the calculation of the cost of sales and hence from the computation of the gross profit of the company .
Therefore, the cost of sales of Mark Equipment Pty Ltd for the present year and the previous year would be,
The assessment of the financial health of Mark Equipment Pty Ltd can be carried out by the examination of the financial ratios of the company. The analysis of the current ratio shows that it has increased from 1.28 in the previous year to 1.34 in the present year. Ideally, the company should have current assets by current liabilities ratio of 2:1, in order to be in a position to comfortably repay their short-term liabilities. Thus, though the percentage of current assets of the company is a little higher than that of the current liabilities, the company should try to improve its current ratio in order to enhance its liquidity. The company also needs to focus on its cash assets so as to improve its creditworthiness.
The debt ratio and the debt to equity ratio indicate the financial leverage of the organization. Debt ratio signifies the relationship between the total liabilities and the total assets. The debt ratio of Mark Equipment Pty Ltd has slightly increased from 0.57 to 0.69 during the period. The debt to equity ratio helps in deriving a reasonable relationship between the debt and the equity value of a company . The present value of the debt to equity ratio also increased a little from 0.17 in the previous year to 0.21. Since the values of the mentioned ratios are moderately low, it can be implied that the company is in a position to raise long-term debts, in case it wants to, considering the moderately low interest rate.
The fixed asset turnover ratio of Mark Equipment is 22.51 in the present year, whereas the fixed asset turnover of the company for the previous year has been 18.07. The total asset turnover for the previous year was 5.23, whereas it decreased to 3.63 in the present year. It implies that Mark Equipment had been able to generate more volume of sales in relation to the fixed assets it holds . Thus, the company had utilized and managed its fixed assets quite fairly, though it needs to improve the utilization of its overall assets. ...Show more
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The Gross Profit Margin of Mark Equipment Pty Ltd Essay”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/1917-banking
(The Gross Profit Margin of Mark Equipment Pty Ltd Essay)
https://studentshare.net/finance-accounting/1917-banking.
“The Gross Profit Margin of Mark Equipment Pty Ltd Essay”, n.d. https://studentshare.net/finance-accounting/1917-banking.
  • Cited: 0 times

Summary

The essay "The Gross Profit Margin of Mark Equipment Pty Ltd" describes that the analysis of the financial statements of Mark Equipment of the last two years reveals that the company had generated reasonable values of revenue and gross income, which had also increased in comparison to the previous year. …
The Gross Profit Margin of Mark Equipment Pty Ltd
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"The Gross Profit Margin of Mark Equipment Pty Ltd"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Finance analysis of Whitbread Financial Ratios
Company analysis is a vital step in the process of determining the performance of the company in order to make an investment decision on whether to invest in the company or not. There are various methods that can be used to carry out a company analysis for investment decision making purposes.
9 pages (2250 words) Assignment
Financial Ratios Analysis of IBM 2005-2006
These changes can be attributed mainly to the implementation of “The Pension Protection Act of 2006 (the Act) was enacted into law in 2006”(IBM 2006) where IBM has to meet its contractual obligations. In addition, its current assets decreased by $1,001 million ($45,661 - $44,660 million) due to “Decline of $3,030 million, net of a favorable $202 million currency impact, in Cash and cash equivalents and Marketable Securities due to current-year requirements in pension funding, share repurchase, dividend payments, tax payments, acquisitions and capital spending”(IBM, 2006).
5 pages (1250 words) Case Study
Bankruptcy prediction
"The implication is that UK analyst referring to one of the well known bankruptcy identification models would in any one year correctly classify the dozen or so listed industrial companies which will fail, but will incorrectly identify about 120 of the remaining 600 as likely to go bankrupt.
13 pages (3250 words) Research Paper
Financial Ratios
You can use them to examine the current performance of your company in comparison to past periods of time, from the prior quarter to years ago. Frequently this can help you identify problems that need fixing. Even better, it can direct your attention to potential problems that can be avoided.
7 pages (1750 words) Essay
Financial Ratios Analysis
c. Cost of food sold percentage: This is expressed as cost of foods soled as percentage of total food sales. This works out to be 38.9%, which is within the range of industry average of 35-40%. However, this actual of 38.9% is
3 pages (750 words) Essay
Financial ratios analysis
According to this plan, they will not send any waste to landfill by 2012. (Marks & Spencer, 2010) The company offers clothing and food, as well as home ware, furniture and technology. The company gained recognition and importance in the British business
4 pages (1000 words) Essay
FINANCIAL STATEMENTS AND RATIOS ANALYSIS
This is a study about financial analysis of banks before and after the global financial crisis that hit the globe starting in year 2008. More specifically, it will consider two banks namely
6 pages (1500 words) Assignment
Financial Ratios Analysis and Comparison Paper
A comparative analysis with a local healthcare organization namely, Health Management Associates have been conducted to determine the scope of improvement in the performance of healthcare services. The financial ratios play a
3 pages (750 words) Essay
Critically discuss how ratio analysis can help in the prediction of bankruptcy
Many financial ratios were integrated into professional statistical and intelligent techniques as variables for assessing the company’s financial health (Kumar & Ravi, 2006). Especially popular multivariate techniques
1 pages (250 words) Essay
Financial Ratios
The analysis will then proceed to determining the better company for investment based on the analysis developed. Such an analysis is useful
6 pages (1500 words) Essay
Comments (0)
Click to create a comment
Let us find you another Essay on topic The Gross Profit Margin of Mark Equipment Pty Ltd for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us