• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Business resources M3

Extracts from this document...

Introduction

Profitability ratios Profitability ratio measures whether a business is profitable and how much profit the business is making. Gross Profit margin The gross profit is the profit made by the business by just taking into account the direct purchases that the business made to get the goods to the customer. Formula Gross profit/sales revenue x 100 Working out - �657,500/�845, 500 x 100 Answer = 77.76 This means that for every �1 of sales revenue, �0.77 remains after all direct expenses has been deducted. This money contributes towards covering the other expenses of the business. Net profit margin The net profit is the profit the business has made after deducting the expense and tax. ...read more.

Middle

So this means that the business makes a net profit of 41.37 percent after deducting all the expenses. Return on capital employed Return on capital employed measure the level of profit compared to the value of net assets invested in your business Formula - Net profit/capital employed x 100 Working out - 349,810/1,600,000 x100 Answer = 21.86% This means that the company is making 22 % on the money they have invested in the company i.e. return on capital employed ratio. This indicates that the business is utilising its assets wisely has it has a high figure. Sales to cost of sales Formula - sales/cost of sales Working out - 845,500/188,000 Answer = �4.49 This means that out of every 1 pound of cost of sakes the business is making �4.49 of sales. ...read more.

Conclusion

However, care must be taken when comparing the stock turnover ratio of different businesses, since a supermarket, for example, is likely to have much higher stock turnover. Debtor's day ratio This shows how long, on average a business takes to collect the debts owed to it by its customers who have purchased their good on credit. Formula Debtors/sales turnover x 365 Working out - 34,981/845,500 x 365 Answer = 15 days This means that on average it takes the business 15 days to collect its trade debts. This is a good sign of the business keep on track of its debtors and collecting it quickly enough. ?? ?? ?? ?? Abdulaziz Omar Unit 2 - Investigating Business Resource ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Business resources P5

    the name of the financial statement and then their have the date for that specific time. The name of the owner is Isaac Swery and the company name is Home Sweet Home. Then the name of the financial statement is balance sheet and the date for that specific time is 31st of December 20XY.

  2. Assignment 4: ethical issues. The community. P4 and M3

    of British Industry), which represents 150,000 businesses, and it can also be a single-issue locally based organisation like CLARA (Central Area Lamingtons Resident's Association). Primark is under the influences by many pressure groups. They make sure that the business is operating ethically and that they are following the country laws.

  1. A2 Business CourseWork

    For instance a few years ago organic products were introduced following an explosion of people wanting to buy them. Tesco had to meet this demand and provide organic products that were widely available to the general public at a reasonable price.

  2. Btec Business Level 3 Year 1 - Introduction to Accounting

    The Guy Roper has to think about these account first then will be much easier for him to calculate trading and P&L account and the less expenses can be done at any item when these first. Finally the Gross Profit minus business overhead(less expenses)

  1. Financial Ratio Analysis.

    Knowing how much money the business actually has on hand might be a good clue as to whether it has budgeted enough to pay expenses between the times when it's customers to pay their bills. Going forward, we will discuss further between Accrual accounting and Cash flow accounting, where there are potential timing differences in recognising revenues and expenses.

  2. Investigating Business Resources Unit 2 P3

    Hire Purchase With a hire purchase agreement, after all the payments have been made, the business customer becomes the owner of the equipment.

  1. Sainsbury's Ratio Analysis

    The interest rate at the bank is higher than that is seen, means that it would make investors to think before they put the money in. Liquidity: Businesses can ratios to work out their liquidity by using the Current Ratio and Acid test Ratio.

  2. Business resources P1

    is, the location of the job, the duties and responsibilities of the job, hours of work and the rate of pay. Sainsbury have person specification as part of the human resource functions because it is important as it is the requirements the employee need to be able to perform at a satisfactory level.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work