As compared to the previous year, the gross profit margin has decreased for these 3 companies. For the year 2012, London Biscuit Bhd has the better profit margin meaning this company keeps more money from every Ringgit and sales. In any case, diminishing the gross net revenue incidentally might be helpful over the long haul. A business might diminish its gross overall revenue by bringing down the expense of the products it offers or by utilizing higher quality, and in this way more costly, materials to make the merchandise. Higher quality products hold clients, which additionally can bring net revenues up later on.
Capital structure or financial leverage deals with a very important financial management question. The question is – ‘what should be the ratio of debt and equity?’ Before scratching our minds to find the answer to this question, we should know the objective of doing
10. The operating profit margin indicates the percentage of the turnover that realised a profit after provision has been made for all normal operating expenses. The aim of this analysis is to detect consistency or positive/negative trends in a company's earnings. A resultant positive profit margin analysis translates into positive investment quality. It is often the quality, and growth of a company's earnings that drive its stock price.
To advise Pronto PLC’s management, there are certain key factors which impact the reasons that are responsible for choosing the right source of finance from a long-term and short-term perspective. Financing can come in the form of debt or investment, and finance terms can vary significantly. These decisions are important for the firm’s valuation and assessment of its resources. Therefore, following are some of the important factors that should be considered while deciding on the source of finance: Risk: This should be considered when the company is unable to meet the financial commitments relating to a specific source of finance. When it comes to choosing suitable funding, the company must thrive to minimise the overall risk associated with
LIQUIDITY ANALYSIS Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. These ratios measure the ability of a company to pay off its short-term liabilities when they fall due. The liquidity ratios are a result of dividing cash and other liquid assets by the short term borrowings and current liabilities. They show the number of times the short term debt obligations are covered by the cash and liquid assets. If the value is greater than I, it means the short term obligations are fully covered.
In order to know the Bayou Clinic’s position or capabilities, Candy needs to evaluate the financial ratios of Bayou clinic. (Banerjee, 2015) stated that many financial ratios have been developed over the years to allow for easier analysis of key metrics. A set of relationships is known as liquidity ratios and is designed to measure the ability of the company to meet its current obligations. The cash ratio is a ratio often used to quantitatively measure liquidity, and is generally considered in conjunction with current and quick ratios. The cash ratio is the number of times that the company could meet its current obligations to its current cash balances.
The key finding was the gross/profit margin for the merged company. The findings showed the current gross/profit margin for the new company is currently 6.25 percent in combining both facilities revenue and cost of goods sold. The goals for the system level team is to increase the gross/profit margin to 23 percent over the next year. To reach the goals, Graham et al. (2015) describe the use of a balanced scorecard to enable individuals or groups to understand how they contribute to the overall strategies of the business.
Thanatawee (2011) conducts study on dividend policy of listed firms in Thailand over the period 2002 to 2008 and reports that larger and more profitable firms with higher free cash flows and have maintained high earnings relative to total equity are more likely to have a high payouts. Besides, their study shows that for firms those have higher growth opportunities, proxied by market-to-book ratio, tend to have lower dividend payout ratio but higher dividend yield. His study provides support for the free cash flow and life cycle hypotheses. Studies of mentioned researchers contributed to introduce the earned/contributed capital mix as a basic measure for life cycle stage of firms. After that, most studies have used the mix of earned/contributed capital as firms’ life cycle measurement (Chay and Suh, 2009; Wang et al.
After deducting the monthly outflows from the inflows a positive balance is available for the 6 month duration. From the income statement prepared it can be seen that a total sales of 1,350,000 pounds was made at a cost of 390,000 pounds. The gross profit for 6 month is 960,000 pounds. The gross profit margin was calculated as GROSS PROFIT/SALES which gave us 71%. The gross profit margin is good as regards to the volume of sales made for 6
It measures the level of assets which is financed by creditors and the portion of assets which is financed by shareholders. It shows the remaining amount of equity that will remain after all liabilities are paid off. Equity ratio test the soundness of the capital structure of a firm. A higher equity ratio shows that a firm is in a good solvency position whereas a lower equity ratio shows that a firm is in financial difficulties which represents losses and high risks for creditors. Equity Ratio = Net Income Equity 4.5.4 Loan to deposit ratio (LDR) Loan to deposit ratio measures a bank’s total loan over total deposits.