accounting and financial management

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Part A
1.
Profitability Ratio:
1) Gross Profit Margin = Gross Profit / Sales Revenue x100%
Year 2011:
Gross profit = £11,740
Sales revenue = £25,300
Gross profit margin = 11,740 / 25,300 x100 = 0.464 x 100 = 46.4%
Year 2010:
Gross profit = £11,700
Sales revenue = £22,000
Gross profit margin = 11,700 / 22,000 x100 = 0.531 x 100 = 53.1%
Decreasing in the gross profit margin by 6.7% is high percentage.
2) Net Profit Margin = Operating profit / Sales x 100%
Year 2011:
Operating profit = £4,340
Sales = £25,300
Net profit margin = 4,340 / 25,300 x100 = 0.171 x 100 = 17.1%
Year 2010:
Operating profit = £6,700
Sales = £22,000
Net profit margin = 6,700 / 22,000 x100 = 0.304 x100 = 30.4%
Decreasing in the net profit margin by the percentage of 13.3%.
3) Return On Capital Employed = (Operating Profit/Share capital +reserves +non-current liabilities) x 100%
Year 2011:
Operating profit = £4,340
Share capital = £7,400
Reserves = £3,300
Non-current liabilities = £7,000
Return on capital employed = ( 4,340 / 7,400 + 3,300 + 7,000 ) x 100 = 0.25 x100

References: Investopedia, 2011. Ratio Analysis. [online] Available at: The Times 100, 199?. Finance Theory. [online] Available at: Atrill, P. and McLaney, E., 2011. Accounting and Finance for Non-Specialists. 7th Edition. Financial Times: Prentice Hall. Turton, A. Workshop 4, PGBM12 Accounting and Financial Management. University of Sunderland, unpublished. Turton, A. Workshop 8, PGBM12 Accounting and Financial Management. University of Sunderland, unpublished. Turton, A. Workshop 10, PGBM12 Accounting and Financial Management. University of Sunderland, unpublished. The Institute of Chartered Accountants in England and Wales. Business Budgeting. [online] Available at: Texas Wesleyan University, 2011. Budgetary Control and Responsibility Accounting. [pdf] Available At: