• 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...


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.


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.


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

    to operate ethically at all stores, because one mistake may cause many. Pressure groups: The term pressure group is a very wide definition that does not clearly distinguish between the groups that fall under the term. For example, a pressure group can be a huge organisation like the CBI (Confederation

  1. A2 Business CourseWork

    Furthermore Tesco must ensure that the products are not out of the financial reaches of their customers. What this means: This means that Tesco needs to provide a wide range of good quality and value products. This means that they have to try and evaluate factors that may lead to people wanting to buy new things.

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

    Wages employees are earning in some weeks, depending on how much work they do. Salaries - A regular payment, usually monthly or weekly, made by an employer, under a contract of employment, to an employee. Salaried employees it receive a set amount of money each week or month.

  1. Business resources P1

    The employee needs to know before their apply for the job that what the qualification education level required is, the training and experience required is and the personal attributes and qualities required for the position. Sainsbury has a disciplinary action team which deals with staff who are late to work, cause disruption at work, behaviour and attendance.

  2. The maintenance of accurate records supplies the company with the financial data that assists ...

    Above is an example of a credit note which states: * The money owed * Details of the purchase(reference number, quantity, and unit price) * The name and address of seller * The name and address of the buyer * Credit note number * Details of discounts ( trade discounts and cash discount)

  1. Investigating Business Resources Unit 2 P3

    Short term lending maybe an overdraft, which a company should keep within a limit set by the bank. Interest is charged at a variable rate on the amount by which the company is overdrawn from day to day. Building Societies Building societies are also able to offer loans, business accounts and overdraft facilities based on the business plan.

  2. Investigating Business Resources

    Motivation How more people can develop themselves in their work how larger motivation is. Incentives Try to let someone do something. Grievance Procedures A grievance procedure is one of the ways to resolve a problem at work. However, you might try talking with your employer informally before using the formal grievance procedure, to see if that helps.

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