4. PROFITABILITY RATIO
a. Gross Profit Margin
Gross profit margin is one of the most important indicator to measure company’s health. Gross profit is the balance that the company have after subtracting the cost of producing goods from the sales figure. So, gross profit margin is the percentage of gross profit from the sales value that company achieved. The higher the percentage of gross profit margin the better.
The industry average of gross profit margin was within 22 percent. However, in Caltron Ltd., the figures indicate a decreasing trend from 2001 to 2003 starting with 18 percent down to 16 and 15 percent. It is clearly stated in the Statement of Financial Positions of the company that, although they are making more sales but their cost …show more content…
Administration of account receivables needs to ensure the organization gathers the installment from the debtors on timely basis so the organizations financial circumstance is better in future dates. Same goes to the accounts payable where the organization should accept the open door of the early installment rebates offered by the creditors; ii. Besides that, management should also focus to reduce the labor cost and cost of raw materials. This variable cost impacted the company so badly as it lower down the company net income; iii. Other than that, investment on fixed assets also must be properly planned and effects on the automation in production process to the number of labor needed should also take into accounts. This is to avoid the company from suffering to pay high operating cost as well as freeze the cash money by buying unnecessary machine or fixed assets and iv. Finally, the management should foresee when the automation come into place, there will be high inventories in the company and it need to be manage in an efficient way. So, it is best to have a good marketing team and sales plan in place to make sure that the products can be sold quickly to get the revenue for the …show more content…
Caltron ought to lessen her stock turnover to accomplish operational proficiency and comparable to industry normal. One of the alternatives that can be considered is to actualize sales. Under this option, Caltron delivers goods to her wholesalers or affiliates and just pay after offering it. This will specifically diminish her stock and in the meantime, increment the chance of item introduction. It is highly recommended to lay off the existing low educational level operational staff as the factory is highly automated which requires minimum production workforce. It is also advisable to recruit one or two electronic engineers to run the plant. It is also advised to appoint couple of electronic specialists to run the plant. This measure will instantly lessen SG&A of the organization will enhance the profitability.
2. For those immediate clients with credit term, it is essential to ensure they pay on time to enhance Account receivable turnover. The business normal is 32 days, and Caltron's most recent turnover was 46 days. One measure to urge clients to pay on time is to charge enthusiasm for the past due over forceful obligation pursuing.
3. Company is advised to pay sales staff of Caltron through sales incentive program rather than straight salary and also to put them out of
a. Gross Profit Margin
Gross profit margin is one of the most important indicator to measure company’s health. Gross profit is the balance that the company have after subtracting the cost of producing goods from the sales figure. So, gross profit margin is the percentage of gross profit from the sales value that company achieved. The higher the percentage of gross profit margin the better.
The industry average of gross profit margin was within 22 percent. However, in Caltron Ltd., the figures indicate a decreasing trend from 2001 to 2003 starting with 18 percent down to 16 and 15 percent. It is clearly stated in the Statement of Financial Positions of the company that, although they are making more sales but their cost …show more content…
Administration of account receivables needs to ensure the organization gathers the installment from the debtors on timely basis so the organizations financial circumstance is better in future dates. Same goes to the accounts payable where the organization should accept the open door of the early installment rebates offered by the creditors; ii. Besides that, management should also focus to reduce the labor cost and cost of raw materials. This variable cost impacted the company so badly as it lower down the company net income; iii. Other than that, investment on fixed assets also must be properly planned and effects on the automation in production process to the number of labor needed should also take into accounts. This is to avoid the company from suffering to pay high operating cost as well as freeze the cash money by buying unnecessary machine or fixed assets and iv. Finally, the management should foresee when the automation come into place, there will be high inventories in the company and it need to be manage in an efficient way. So, it is best to have a good marketing team and sales plan in place to make sure that the products can be sold quickly to get the revenue for the …show more content…
Caltron ought to lessen her stock turnover to accomplish operational proficiency and comparable to industry normal. One of the alternatives that can be considered is to actualize sales. Under this option, Caltron delivers goods to her wholesalers or affiliates and just pay after offering it. This will specifically diminish her stock and in the meantime, increment the chance of item introduction. It is highly recommended to lay off the existing low educational level operational staff as the factory is highly automated which requires minimum production workforce. It is also advisable to recruit one or two electronic engineers to run the plant. It is also advised to appoint couple of electronic specialists to run the plant. This measure will instantly lessen SG&A of the organization will enhance the profitability.
2. For those immediate clients with credit term, it is essential to ensure they pay on time to enhance Account receivable turnover. The business normal is 32 days, and Caltron's most recent turnover was 46 days. One measure to urge clients to pay on time is to charge enthusiasm for the past due over forceful obligation pursuing.
3. Company is advised to pay sales staff of Caltron through sales incentive program rather than straight salary and also to put them out of