Ratio Analysis

Gross Profit * deoxycytidine monophosphate% receipts sales tax revenue This is the strand that friendship makes on its sales, and would be expected to go on reasonable constant. Since, the dimension is affected by only a small bit of variables, a alteration may be traced to a change in: * Selling prices normally mensurable though sometimes unavoidable e.g. because of adjoind competition. * Sales mix oft deliberate * procure cost including carriage or discounts * product cost materials, toil or production overheads * Inventory errors in counting, valuing or cut-off, stock winning shortages. NET PROFIT MARGIN The terminal derive gross profit or operating profit margin is calculated as: PBIT * 100% Sales revenue any(prenominal) changes in net profit margin should be considered elevate: * Are they in bank line with changes in gross profit margin? * Are they in line with cha nges in sales revenue? * As m whatever be are fixed they need not necessarily append/decrease with a change in revenue. * Look for undivided cost categories that have increased/decreased significantly.

RETURN ON CAPITAL EMPLOYED ROCE = Profit *100% chief city engaged Known as the primary ratio due to its importance as a measure of profitability, Profit is metrical as: * Operating (trading) profit or * The PBIT i.e. the profit before taking account of any returns paid to the providers of long term finance. Capital employed is measured as: * Equity, plus * Interest-bearing finance, less( prenominal) * Cash balances, i.e. long ! term finance supporting the crinkle ROCE for the current class should be compared to: * the prior year ROCE * a tar mother ROCE * the cost of borrowing * Other companies ROCE in the aforesaid(prenominal) industry. Net asset turnover rate The net asset turnover is: Sales revenue Capital employed (= net assets) It measures ways susceptibility in generating revenue from the net assets at its...If you want to get a full essay, order it on our website: OrderEssay.net

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