The paper "Accountancy, Profitability, Liquidity and Efficiency " is a good example of a business assignment. Profitability ratios show the success of the firm in generating profits. Profitability ratios offer several different measures of the success of the firm at generating profits. Profitability ratios, therefore, measures how well a company is performing through the analysis of the profits earned relative to the sales, total assets and net worth (Tamari, 2007, pp. 89-95). The financial ratios are given indicates that the operating profit sales margin for the company decreased from 19% in the year 2009 to 16% in the year 2010.
The decrease between the years 2009 to 2010 by 3% indicates that the company’ s sales profits for the year 2010 have reduced drastically a clear indication that the company is not in a good financial position compared to the previous year as well as not making adequate sales revenues on its product sales. The drastic reduction could be associated with an increase in the number of competitors in the industry as well as other factors such as inflation, price reduction among others.
According to the company’ s gross profit percentage, it shows instability in the company’ s profits (Tamari, 2007, pp. 89-95). The profit margin in the year 2009 was 42% and 40% in the year 2010.The tremendous drop in profits between the years 2009 and 2010 by 2%indicates that the company is not generating much and heavy profits as compared to the previous year. The reduction in gross profit percentage is a clear indication that the company’ s resources are reducing hence it has limited resources compared to the previous year (Tamari, 2007, pp.
89-95). Despite the mere fact that the company experienced a drop in its gross profit percentage by 2% the gross profit percentage for the company is still high a clear indication that the company has enough financial resources to pay for research, product development, and other costs associated with running and growing business.
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