Here on the right hand side of the table contains the key financial ratios of the most profitable club, while the part in the left hand side signifies the key ratios of the Cardiff unit of Health Hearts club.
b) Profitability Ratio: The difference of the ratio of operating…
The operating profit or the gross profit provides indication about the actual profit acquired by the business operation. (Berman, Knight, Case, 2006, p.66). The operating profits or the business profits have to be generated from the current assets or the operating assets. The main weakness that the new center has shown that it has somehow failed to utilize its currents assets to gain more operating profit.( “Year Book Australia, 2001 ) That is the reason why the operating profit as a percentage of sales is also very less. Also the operating profit of the Cardiff unit may be lesser as a percentage due to the fact that this unit has just started its business operation and is not in a position to utilize its asset base to the optimal level. The next key parameter considered is the operating profit by sales ratio. The difference comes to be 2.42. Here the result of the Cardiff unit is slightly less than the entire most profitable club. That means the center is not able to generate adequate amount of business profit or operating profit. It may be due to several reasons but the main factor that can be identified is that this center in particular operates with higher expenses than that of the average centers.
Efficiency Ratio: After this ratio, the following few parameters are almost similar when compared to the overall most profitable club performance of Healthy Hearts. The difference between the sales to operating asset ratio is just 0.46, which indicates relatively better sales turnover ratio for the Cardiff unit. But next ratio shows some negativity as well. The expense to sales ratio is more in the case of Cardiff unit by 2.42. This means the unit makes more expenditure to generate the desired amount of sales figure. This is not always an encouraging sign for any business. Huge gap is also being noticed when sales as a percentage of the current assets are compared. The difference comes to around 8.70. ...
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