Satisfactory Essays
1373 Words
Grammar
Plagiarism
Writing
Score
Unit 5
P5
Introduction
In this assignment I will be using the profit and loss accounts and balance sheet for SIGNature 's business to work out the Profitability, Liquidity and Efficiency Ratios.
Profitability
Gross profit Percentage sales
Gross Profit Sales Turnover ×100
244200 444000 ×100=53%
Net Profit Percentage
Net ProfitSales turnover×100
73960444000×100=16.66%
Return on Capital Employed (ROCE)
Net Profit before interest and taxCapital Employed×100
73960149160×100=49.58%

Liquidity
Current Ratio
Current AssetsCurrent Liabilities
7016026000=2.69

Acid Test Ratio/ Liquidity Ratio
Current Assets-stockCurrent liabilties
70160-24420026000=1.75

Efficiency
Debtors payment period
CreditorsCredit Purchases×365
41000444000×365=33.7 (34 days)
Credit payment period
CreditorsCredit Purchases×365
15500199800×365=28.3 (28 Days)
Rate of stock turnover
Average stockCost of goods sold× 365
12000244200×365=17.93 (18 Days)

M2
Introduction
I will now explain what each of these ratio 's mean to Sharma and Ryan, and how it effects their business 's overall financial performance.
Profitability
Gross profit Percentage sales
Gross Profit Sales Turnover ×100
244200 444000 ×100=53%
The percentage of gross profit is a percentage to find out how much profit is made from every £1 to the cost of goods. In the case of SIGNature 's business every £1 they make in profit 53p is profit and 47p is cost of sales. The factors that effect this percentage is the sales and most importantly the cost of making those sales, if the cost of making the sales is greater than the sales than the business isn 't making any profit.
Net Profit Percentage
Net ProfitSales turnover×100
73960444000×100=16.66%
The net profit ratio is referred to as the net profit margin, its shows for every £1 made in sales how much is left as net profit after all expenses have been deducted. The net profit percentage for SIGNature 's business is 16.66% that 's

## You May Also Find These Documents Helpful

• Good Essays

What do the profitability ratios reveal about the financial position of the company? Which users may be interested in each type of ratio? What does the collected data reveal about the performance and position of the company?…

• 385 Words
• 2 Pages
Good Essays
• Powerful Essays

Gross profit percentage shows you how much gross profit you have made from the sales compared to how much the business has spent on making them.…

• 2433 Words
• 7 Pages
Powerful Essays
• Good Essays

The gross profit percent shows the portion of sales available to cover all expenses and profit after deducting the cost of the product. From the results from parts a and b, we can see that Pinnacle has the ability to generate cash for payment of obligations, expansions and dividends, however the gross…

• 1307 Words
• 6 Pages
Good Essays
• Satisfactory Essays

Gross profit is the profit you make before taxes. Net profit is more important, because it is what you have after paying taxes, or the money you actually get to keep.…

• 563 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

Net profit margin of Barratt was 2.87% in 2013 and 9.67% in 2014 respectively. It means that in 2013 the company managed to transform 2.87% of its sales into net income and in 2014 it managed to transform already 9.67% of its sales into net income. In other words, in 2013 the company gained 2.87 pounds of net income per 100 pounds of revenue. In 2014 this number significantly increased and became 9.67 pounds of net income per 100 pounds of revenue. Persimmon had a higher net profit margin in 2013 and 2014 than Barratt and it was 12.33% and 14.45% respectively. So Persimmon earned 12.33 pounds of net income per 100 pounds of revenue in 2013 and 14.45 pounds of net income per 100 pounds of revenue in 2014.…

• 584 Words
• 3 Pages
Satisfactory Essays
• Better Essays

However, this increase in revenue does not necessarily indicate an increase in profits. The direct cost of goods sold at the end of the 2005 fiscal year is over \$4.5 million more than the cost of goods sold at the start of the year. The difference between the sales, or revenue, and the direct cost of goods sold, is used to calculate the gross profit margin. The gross profit margin is the amount of profit generated before overheads and other expenses are taken into account. The gross margin at the end of the 2005 was \$8,786,061, which is \$221,823 more than the gross margin generated the previous year (Riordan Manufacturing 1). With an increase in sales over a 12-month period, the company experienced only a slight increase in gross profit margin. To increase their gross margin, Riordan may consider a slight increase in product cost. Even a small percentage increase in product cost to consumers, the company can increase gross profit margin…

• 1029 Words
• 5 Pages
Better Essays
• Good Essays

Gross Profit Margins is a financial ratio which for evaluating a company's core activities of profits. The gross profit Margins has remained relatively static over the three year period, but a little decline in 2007 Gross profit margins is 20.3 but in 2009 became 17.2 it means the 2009 cost will be higher than 2007 cost, the devaluation of the pound is the major reasons, because the sales was risen in this years, the cost also risen.…

• 1055 Words
• 5 Pages
Good Essays
• Good Essays

Item # 3 speaks about the services provided by audit firms to their audit clients,…

• 813 Words
• 4 Pages
Good Essays
• Satisfactory Essays

The higher the percentage resulting from the calculation is a better result. Sainsbury’s has had a 0.05% in its gross profit margin, this can be improved through the increase in sales of stock or reduce cost of sales.…

• 736 Words
• 3 Pages
Satisfactory Essays
• Good Essays

The net profit margin formula looks at how much of a company's revenues are kept as net income. The net profit margin is generally expressed as a percentage. Zara is again a leader by having 10.01%, H&M 9.60, Benetton 7.05%, and Gap -06% Zara’s success again is attributed to its ability to keep its cost of goods sold down around 48% of sales whereas The Gap’s cost staggering 70% of sales…

• 929 Words
• 4 Pages
Good Essays
• Good Essays

The gross profit percentage is calculated and then is compared to previous years to indicate if the business is growing or declining in sales. If the profit has increased than that means that the business has increased the amount of products sold before expenses are taken away. SIGNature’s gross profit was 57.70%. This is a reasonably high percentage this is an indicator that the economy may be good and the customers have more disposable income to spend. For Rhiannon this is a good indicator that her business in making a decent profit.…

• 2088 Words
• 9 Pages
Good Essays
• Best Essays

In this assignment we would be looking at Performance Ratios of Next and how well they are doing through 2008 – 2012. We have looked more in depth on their profitability and working ratio analysis.…

• 3948 Words
• 16 Pages
Best Essays
• Good Essays

This ratio measures the performance of a company in using its assets to generate revenue, which shows how efficient the company is using their resources.…

• 447 Words
• 2 Pages
Good Essays
• Powerful Essays

Gross Profit Percentage- McDonald’s gross profit percentage for 2008 was about 27.39 percent, which was a good increase from 2007’s gross profit percentage of 17.02 percent. The increase indicates McDonald’s made 10.37 cents more gross profit on each dollar of revenue, making the company’s cash flows more liquid.…

• 1176 Words
• 5 Pages
Powerful Essays
• Good Essays

* SG&A percentage is expressed as a percentage of net sales to facilitate comparisons across items, stores, and merchandise categories within and between firms.…

• 5757 Words
• 24 Pages
Good Essays