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Harrod : Ratio Analysis

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Harrod : Ratio Analysis
Ratio Analysis

Return on capital employed
Basically, it measures business performance. This ratio is used to calculate the return versus the money that is invested.

Gross profit margin
This ratio uses for measuring of profitability in selling, buying or producing goods before any other expenses are put into account. Therefore, any change in this figure can have an important result on the net profit margin of the year.
Harrods’ gross profit margin can be divided into 2 parts which is the year between 2000-2003 and 2004-2006. Harrods has pretty much the same percentage of gross profit margin from 2000 to2003 is between 41 and 43% and from 2004 to 2006 is between 51-53%. This means gross profit margin had been increased by 10% over that period. That may be because of decreasing in the cost of sale between 2003 and 2004 which is a slight over 100 million pound or an increase in selling prices. Operating Expenses margin
It can be seen that the Operating Expenses margin of Harrods had increased at least 10% over the period that is not a good sign of profitability. Because this ratio indicates how efficiently the expenses is being managed. Thus, the lower the operating ratio, the greater the profitability. In Harrods case, the cause might be because of Sales; it had been decreased since 2001 and may be for a few of reasons, such as poor maintenance or an ineffective advertising.
Net profit margin
Basically, it is the amount of profit after all non- financing costs have been deducted. Net profit margin is built by the company as a percent of the sales left. Net profit margin of Harrods had been fluctuated with the lowest was 4.70% in 2003 and the highest was 13.51% in 2006. It seems that a high level of expenses in 2003 directly effect on net profit margin of Harrods which can means the company’s earning is not as good as before. Factors for example the intenseness of competition, the group of customer and the economic circumstance are influence. This

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