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The evidence in form of the data calculated and the research carried out shows that the business is very viable.

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Introduction

Viability of the business The evidence in form of the data calculated and the research carried out shows that the business is very viable. From the early stages of the document it is clear that the business has every possibility of being a success. The location is a prime one. It is located near the centre of a village. It is a large enough property and was once a local shop so the key amenities such as heat, light and water are already installed. It also has parking spaces for a number of vehicles. This is an advantage as it means customers will feel more secure when parking and local residents will not be troubled by increased traffic blocking driveways etc. Another advantage of having parking spaces is that it will attract customers from not just the Bugbrooke area but also surrounding areas. This is important because it means that custom and revenue will be increased. Another reason why the business should be successful is because there are no close competitors. ...read more.

Middle

Other information that shows the business is viable is the Profitability Ratios. One of the profitability ratios is the Gross Profit Margin. This shows how much profit is earned relative to the amount that is spent. Gross profit is Sales Revenue - Cost of Sales. These costs of sales are materials such as stock and wages. The gross profit is before the other costs are subtracted. The Gross Profit Margin is important as it shows how well a business can control its production costs. The Gross Profit Margin is calculated the following way. Gross Profit Margin = Gross Profit __________ X 100 Sales Revenue The Gross Profit Margin for the business is calculated in the following way: 28,296 ______ X 100 95,760 = 30% This figure shows that the business is able to control its production costs well. A Gross Profit Margin of 30% shows that for every �100 spent on production costs �30 is made in Gross Profit. ...read more.

Conclusion

This information is useful to shareholders because if the ROCE is very low then a change of manager may be needed to ensure that shareholders make money from investing. The ROCE is calculated in the following way: ROCE=Net Profit ________ X 100 Net Assets The ROCE for the business is: 15,813.20 ________ X 100 130,000 =12% This shows that for every �100 that is put into the business �12 is made in profit. This figure is quite poor however taking into consideration the business owns the premises it will be operating from it is clear why ROCE is 12%. The premises are worth �130,000. If the business rented a property ROCE would be much higher however running costs would be greater meaning that the Gross and Net Profit Ratios would be smaller. Overall the Profitability Margins show that the business is very viable. Gross Profit of 30% and Net Profit of 17% show that the business is efficient and makes a substantial amount of profit. The business is also a viable investment when the fact that some costs will be reduced as time goes on. This will mean that Net Profit Margins will increase. ...read more.

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