Appendix B Profitability Analysis Solutions to Questions B-1 Absolute profitability measures the impact on overall profits of adding or dropping a particular segment‚ such as a product or customer‚ without making any other changes. B-2 Relative profitability involves ranking segments‚ each of which may be absolutely profitable‚ for the purpose of making trade-offs among the segments. Such trade-offs are necessary when a constraint exists. Otherwise‚ they are not necessary. B-3 Every business
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RATIO ANALYSIS (ALL VALUES IN Rs. MILLION) 1. GROSS PROFIT MARGIN (%): GROSS PROFIT = NET SALES – COGS = TOTAL REVENUE – (Employee Benefit Expense + Operating and Other Expenses + Finance Costs) = 53107 – (22510+21598+1025) = 7974 GROSS PROFIT MARGIN = (NET SALES – COGS)/NET SALES = (7974/ 53107)*100 = 15.01497% 2. RETURN ON ASSET(RoA) RETURN ON ASSET = (PAT/TOTAL ASSET)*100 = (4606/63454)*100 = 7.258% This indicates that around 7.3% of all assets have been utilized
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was formedin 1965 with the merger of the Pepsi-Cola Company and Frito-Lay‚ Inc.PepsiCo has since expanded from its namesake product Pepsi to abroader range of food and beverage brands‚ the largest of which includean acquisition of Tropicana in 1998 and a merger with Quaker Oats in2001 - which added the Gatorade brand to its portfolio as well.As of 2009‚ 19 of PepsiCo’s product lines generated retail sales of more than $1 billion each‚ and the companys products were distributedacross more than 200 countries
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Ratio Analysis Memo Profitability: Asset turnover and Profit Margin 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? The profitability ratios measure a company’s operating success for a specific period of time. Most investors and bankers are going to be interested in the profitability of a company. The data for asset
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1) Current Ratio The ratio is mainly used to give an idea of the company’s ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash‚ inventory‚ receivables). The higher the current ratio‚ the more capable the company is of paying its obligations. 2) Quick Ratio An indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. For this reason‚ the ratio excludes inventories
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Ratio analysis 1. Liquidity ratio The liquidity ratios measure the company’s ability to meet its short-term debt obligations (Intermediate accounting- Kieso‚ D.E.‚ J.J. Weygandt and T.D. Warfield). These ratios include current ratios‚ quick ratios‚ and cash ratio. Current ratio: the current ratio of GM has increased from 1.29 in 2012 to 1.30 in 2013. With a higher ratio in 2013‚ it’s better for GM to meet its short-term obligation. Quick ratio: the quick ratio of GM has improved from 0.79 in 2012
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* Findings and Analysis: Liquidity Ratio 1. Current Ratio: A company’s current assets divided by its current liabilities is known as the Current Ratio. This ratio is regarded as a measure of short-term debt paying ability. It measures the capability to obsolete the current liability with comparing to current asset by how many times. The equation is- Current Ratio = Current AssetCurrent Liability * The general rule of thumb calls for a current ratio of at least 2:1. If it is greater than
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Ratio analysis – Shinepukur Ceramics Versus RAK Ceramics Current ratio Shinepukur: From 2009 to 2010‚ current ratio of Shinepukur has increased by 0.24 because of increase in total current assets and decrease in total current liabilities. The increase in total current has occurred for increase in accounts-and-other-receivables‚ advances-deposits-and-prepayments and cash. Among these elements‚ the increase in advances-deposits-and-prepayments is significant (from 82182270 to 278773841). On the
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Analysis of profitability‚ liquidity and performance The profit of a business is the difference between its revenues and its costs. It is important to consider two main types of profit: 1. Gross profit - this is calculated by deducting the cost of sales of a business from its sales revenue (turnover). 2. Operating profit - is calculated by then taking away overhead expenses from gross profit. Given the above figures it is possible to analyse the profitability of Better Hotels Plc in the two years
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Forecasting Profitability and Earnings In the competitive environment‚ there is a strong prediction in economic theory that profitability is mean reversion both within and across industries. For instance‚ under competition‚ firms will leave relatively profitless industries and turn into relatively high profitable industries. Some companies introduce new products and technologies that bring more profitability for an entrepreneur. Otherwise‚ the expectation of failure which makes companies with low
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