Gross Profit Ratio Analysis

Gross profit Ratio

Gross margin ratio is a profitability ratio that compares the gross margin of a business to the net sales. Higher ratios mean the company is selling their inventory at a higher profit percentage. The ideal level of gross profit margin depends on the business, how long the business has been established and other factors. High gross profit margin indicates that the company can make a reasonable profit, as long as it keeps the overhead cost in control.

Low gross profit margin indicates that the business is unable to control its production cost.

Table of Gross profit and sales Table no. 4.10 In cr.

PARTICULAR YEAR

2010-11 YEAR

RCDF is co-operative federations so this federation main aim is good service with customer satisfaction not earn high profit. So RCDF profit is not more .RCDF earn profit which they fulfill its operating expenses and have extra profit which are use in future growth and plant expansion. RCDF gross profit is under 10% which were fulfilling its operating expenses.

Net Profit Ratio:

Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship between net profit after tax and net sales. It is computed by dividing the net profit (after tax) by net sales.

Formula:

Table of Net profit and net sales Table no.4.11

Rs Cr.

PARTICULAR YEAR

2010-11 YEAR

2011-12

YEAR 2012-13

YEAR 2013-14

Net profit 154934661 106809408 144998428 269627290

Net sales 2803991190 2432000039 3723126686 3957679398

Net profit Ratio% 5.535 4.39 3.89 6.81

Sources of data collection are Annual report and balance sheet

Net profit Ratio = Net profit

And these ratio is an efficiency ratio that shows how effectively inventory is managed by comparing cost of goods sold with average inventory for a period. This measures how many times product is sold during a period.

Table of COGS and Average stock 4.13

In cr.

Particular YEAR

2010-11 YEAR

2011-12

YEAR 2012-13

YEAR 2013-14

COGS 2610000000 2140000000 3580000000 3690000000

Average Stock 113000000 92600000 176000000 210000000 Stock Turnover Ratio 23.03 23.15 20.31 17.54

Sources of data collection are Annual report and balance sheet

Chart of COGS and average stock 4.20

Chart of stock turnover ratio 4.21

Interpretation

RCDF stock turnover ratio was 2010-11 23.03 and 2011-12 was 23.15 that are good that ratio shows RCDF have proper control on stock. RCDF have proper management on average inventory and maintain cost of goods sold. In 2012-13 and 2013-14 stock turnover ratio some decrease and reach the level 20.31 and 17.54.That shows RCDF have increase its control level on stock.

RCDF SALES

Table of RCDF sales Table no. 4.14

Rs Cr.

PARTICULAR YEAR

2010-11 YEAR

2011-12

YEAR 2012-13

YEAR 2013-14

Net Credit sales 2803991190 2432000039 3723126686 3957679398

Sources of data collection are Annual report and balance