The paper "Financial Ratio Analysis and Recommendations" is an amazing example of a Business assignment. Analyze the History of the previous six months of trading and identify exactly what has gone wrong and when. Graphs and tables will be useful in pinpointing this evidence. Formulate clear recommendations into an action plan for improving the situation. You should submit a formal Consultancy Report in which you explain 1, 2, and 3 in an attractive, easy-to-follow way. Note that 1 & 2 are about evidence, so you will need to include ratios, graphs, and tables, but that your explanation and interpretation is just as important.
In 3, your action plan should be as clear as possible. Accounting Ratios Gross margin- It is the profit realized after accounting for the cost of sales. It reflects the ability of the business to increase sales by either increasing the volume or price as well as reduce cost. Gross margin = = = 45% A figure of 45%, is an indication of a huge profit. The ratio of gross margin on sales varies widely from industry to industry, so that it should be used solely for comparing the sales performance of the same company over a period of time. Net margin- This is the second component of the formula for calculating the R. O.C. E.
it seeks to assess the profitability of sales that is the efficiency of sales as a critical event in generating income. It shows the prudence in the management of expenses. Net margin % (or Return on Sales) = = = 22.5% The figure of 22.5% large shows the company huge profits from its activities. The ratio of net margin on sales varies widely from industry to industry, so that it should be used solely for comparing the performance of the same company over a period of time.
Some companies may operate In an industry that is characterized by low-profit margins and high levels of turnover. ROCE- The return on the capital employed ratio is an indicator of how effective a company’ s assets are at generating earnings. In other words, the ratio indicates the number of earnings a company can generate from invested capital, thus enabling investors to forecast the company’ s profitability in an industry.
Brag, S. 2002. Business Ratios and Formulas: Comprehensive Guide. New Jersey: John Wiley & Sons Inc.
Collier, P. 2003. Accounting for Managers: Interpreting Accounting Information for Decision-Making. New York: John Wiley and Sons.
Carey, O. & Essayyad, M., 2001. The essentials of financial management. New York: Research & Education Association.
Weetman, P. 2006. Financial Accounting: an Introduction. New York: Financial Times Prentice Hall.