Case Analysis: Gross Profit Margin In Caltron Ltd.

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Gross Profit Margin

Gross profit margin is a standout among the most essential marker to measure organization's well-being. Gross profit is the balance that the organization have ubtracting the cost goods produced from the sales figure. In this way, gross profit margin is the percentage of gross profit from the business esteem that organization accomplished. The higher the percentage of gross profit margin the better.

The industry average of gross profit margin was 22 percent. In any case, in Caltron Ltd., the figures demonstrate a decreasing pattern from 2001 to 2003 beginning with 18 percent down to 16 and 15 percent. It clearly states in the Statement of Financial Positions of the organization that, in spite of
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In 2001, Caltron Ltd. operating profit margin was 9.36 percent, 2002 the operating profit margin was 3.72 percent and 2003 the operating profit margin was 3.25 percent. This shows the company is having high variable costs that prompts bring down operating salary. The company's incompetence to control the costs in producing products decreased to lower overall income. likely the choice of extending sales could be the reason of the increase in variable cost as the worker's union will need the sales staff to get commissions on the basis of sales amount they made to get salary.

Net Profit Margin

Net profit margin is worried by the shareholders as the revenue transfers into profits earning for the shareholders. Net profit is to calculate after deducting income tax, production expenses and depreciation. Investors will consider this figure as they company gets. The organization demonstrates a net pay of $0.20 for every dollar out of aggregate revenue being 20 percent profit margin

The industry average of net profit margin was inside 6 percent. In 2001 net profit margin for Caltron Ltd. was 4.85 percent. However, in 2002 the net profit margin was significantly fell to 0.58 percent and 2003 the net profit margin was 0.06 percent. It demonstrates that in spite of the fact that the company's sales number is increasing however, they should bear an enormous amount of costs that made the net income to decrease.


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