UNIT 2
To: Shareholders of Hot Fashions
From: 10/11/2013
HOT FASHIONS BUSINESS REPORT
Return On Capital Employed= 53.18%
Return on capital employed (ROCE) is the ratio of net operating profit of a company to its capital employed. It measures in percentage terms whatever the net profit is generated to overall value of the company in terms of capital employed. In the case of hot fashions, they have managed to generate a return on their capital employed of 53.18% net profit in one year.
The business had a great strength as their return on capital employed is over 50%. For a business to gain more than 50% in one year is a could sign. This is due to bigger businesses such as next had a return of capital of 68% in a year and Hot Fashions is a small business and nearly reached to Nexts PLC’s return of capital employed. As well as, the return of capital employed for a clothing sector is 15%, and Hot Fashions business had a massive increase than that which displays they have done very well. However, the business should try a bit harder and aim to reach next percentage of 68%, although they’re a small business.
Gross Profit Margin= 38.88%
Gross profit margin measures how well a company controls its cost. The business looks at the proportion of money left over from revenues after accounting for the cost of goods sold. It shows us; every £1.00 made in sales how much is left as gross profit after the cost of goods sold has been deducted. This means Hot Fashions business for every pound of sales they made, they had a profit margin of roughly up to 39%.
The business had a great strength as their gross profit margin is over 25%. This is good because the retail clothing industries gross profit margin is usually around 25%. For a business to gain more than 25% is a good sign. Looking at bigger businesses such as Nexts PLC’s gross profit ratio, theirs is also over 25% as their gross profit ratio is 32.55%. This
From: 10/11/2013
HOT FASHIONS BUSINESS REPORT
Return On Capital Employed= 53.18%
Return on capital employed (ROCE) is the ratio of net operating profit of a company to its capital employed. It measures in percentage terms whatever the net profit is generated to overall value of the company in terms of capital employed. In the case of hot fashions, they have managed to generate a return on their capital employed of 53.18% net profit in one year.
The business had a great strength as their return on capital employed is over 50%. For a business to gain more than 50% in one year is a could sign. This is due to bigger businesses such as next had a return of capital of 68% in a year and Hot Fashions is a small business and nearly reached to Nexts PLC’s return of capital employed. As well as, the return of capital employed for a clothing sector is 15%, and Hot Fashions business had a massive increase than that which displays they have done very well. However, the business should try a bit harder and aim to reach next percentage of 68%, although they’re a small business.
Gross Profit Margin= 38.88%
Gross profit margin measures how well a company controls its cost. The business looks at the proportion of money left over from revenues after accounting for the cost of goods sold. It shows us; every £1.00 made in sales how much is left as gross profit after the cost of goods sold has been deducted. This means Hot Fashions business for every pound of sales they made, they had a profit margin of roughly up to 39%.
The business had a great strength as their gross profit margin is over 25%. This is good because the retail clothing industries gross profit margin is usually around 25%. For a business to gain more than 25% is a good sign. Looking at bigger businesses such as Nexts PLC’s gross profit ratio, theirs is also over 25% as their gross profit ratio is 32.55%. This