# What Ratio Means : It Is The Percentage Of Gross Profit Essay

1463 Words Oct 2nd, 2015 6 Pages
What the ratio means: It is the percentage of gross profit over the total revenue or sales for the respective year.
Application to the company: We notice that the Gross profit percentage decreased over the two years from 47.81% to 46, 49% and we could base this on the fact that their revenue increased by a large proportion whilst also their Cost of Sales incurred went up by a significant proportion as well, but not as much as their increase in Sales between both years. As a result this has led to a decrease in the Gross Profit percentage for 2014 from 2013.
Ratio 2- Profit Percentage or Net Profit Margin
Profit Percentage or Net Profit Margin 2013: 18, 20% Profit Percentage or Net Profit Margin 2014: 16, 96% Decreased from 2013to 2014
What the ratio means: It is the percentage of profit attributable to ordinary shareholders over the total revenue or sales for the respective year.
Application to the company: We notice that the Net Profit Margin has decreased over the two years from 18, 20% to 16, 96% and we could base this on the fact that their revenue had increased by a large proportion over the two years but likewise their Cost of sales had also increased at a high margin which effectively resulted in their Profit attributable to their shareholders being higher in 2014 than 2013 but by a…

## Related Documents

• ###### Essay Competition Bikes Task 1

strengthen its financial position in hopes to induce overall efficiency of operations. Horizontal analysis results The horizontal analysis is a method used to analyze changes in the company’s financial health between years in values of dollars and percentages using data from the balance sheet and income statement. In the horizontal analysis a base year is set and then other years are compared to the base year. The horizontal analysis will be used to assess Competition Bikes actual financial operating…

Words: 5726 - Pages: 23

University Prepare a summary report in which you do the following 1. Evaluate the company’s operational strengths and weakness based on the following: A. Horizontal analysis of financial statements involves comparison of a financial ratio, a benchmark, or a line item over a number of accounting periods. This method of analysis is also known as trend analysis. Horizontal analysis allows the assessment of relative changes in different items over time. It also indicates the behavior of…

Words: 8361 - Pages: 34
• ###### Common Size Analysis Essay examples

mix of revenues and in the spending for different types of expenses can be identified The ratios often are expressed as percentages of the reference amount. Common size statements usually are prepared for the income statement and balance sheet, expressing information as follows: * Income statement items - expressed as a percentage of total revenue * Balance sheet items - expressed as a percentage of total assets Comparisons Between Companies (Cross-Sectional Analysis) A company may…

Words: 5532 - Pages: 23
• ###### Essay Ratio Analysis : Financial Ratios

RATIO ANALYSIS Financial ratios help external stakeholders, and enterprise managers know how well or poorly a business is performing and pinpoint areas that could do with improvement. Companies can also compare themselves to the competition or to diverse companies in other industries. Size need not be an issue since ratios standardize accounting relationships to provide management with a raw reckoning of financial status and trends. To better categorize them, financial ratios are generally divided…

Words: 2004 - Pages:
• ###### Essay Ratio Analysis : Liquidity Ratios

RATIO ANALYSIS Liquidity Ratios http://www.investopedia.com/university/ratio-analysis/ Current Ratio measures the ability of a firm to meet its short-term (usually up to 1 year) obligations. It is a measure of Liquidity. The higher your Current Ratio is, the greater your short-term solvency. Although there are several ratios which indicate the liquidity of a company, the Current Ratio can provide us with all the information we need. To be really useful we must compare it over at least three years…

Words: 1643 - Pages: 7
• ###### Wid, Wad and Gad Theories in Gender and Development Essay

The Ratios Profitability Sustainability Ratios How well is our business performing over a specific period, will your social enterprise have the financial resources to continue serving its constituents tomorrow as well as today? Ratio | What does it tell you? | Sales Growth = Current Period –Previous Period Sales Previous Period Sales | Percentage increase (decrease) in sales between two time periods. If overall costs and inflation are increasing, then you should see a corresponding increase…

Words: 1462 - Pages: 6
• ###### Financial Analysis Essay

statements. Financial Statement analysis embraces the methods used in assessing and interpreting the results of past performance and current financial position as they relate to particular factors of interest in investment decisions. It is an important means of assessing past performance and in forecasting and planning future performance. The major objectives of financial statement analysis are to provide decision makers information about a business enterprise for use in decision-making. Users of financial…

Words: 9047 - Pages: 37
• ###### Financial Ratio Analysis Report of Ford Motor Company Essays

effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However…

Words: 1925 - Pages: 8
• ###### Essay on Financial Performance of the Company Position

to every financial analyzer. It needs special attention because of complexities involves to managing cash to present day industrial function. A main aspect is the estimation of how mush of finance need for a business organization requires and too what repose. “Business finance is that business activity which is concerned with the acquisition and conversation of capital funds in meeting financial needs and overall objectives of a business enterprise”. The activity of the finance can defined as…

Words: 5821 - Pages: 24
• ###### Essay Financial Ratios and Ford

Financial Ratio Analysis Paper Dehlia Lopez FIN/575 March 25, 2010 University of Phoenix Financial Ratio Analysis Ford Motor Company is one of the automotive industries largest and most successful auto makers with more than 164,000 employees and seventy manufacturing plants world wide, (Ford Motor Company, 2013). The firm is led by President & CEO, Alan Mulally who drives with a ”One Team, One Plan, One Goal, One Ford business strategy for achieving success”, (Ford Motor Company…

Words: 2346 - Pages: 10