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# In this assignment I will be explaining in detail the importance of cash flow, working capital, costs, budgets and breakeven in selected business and also why it is used in selected businesses.

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Introduction

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Profitability Ratios Return on total assets ratio: Return on Total Assets (ROTA) = PBIT * 100 Total Assets For Cadbury Schweppes the ratio will be Return on Total Assets (ROTA) = 924000 * 100 7867000 = 11.7% Dividends payout ratio The payout ratio provides an idea of how well earnings support the dividend payments to the shareholders. More established companies will tend to have a high payout ratio. Dividends payout ratio is calculated as: Dividends / Net income For Cadbury Schweppes -240000 / [21] Return on capital employed The most useful indicator of how well a business has performed is the return on capital employed (ROCE). This ratio compares the profit made in a year to the size of the business, as shown by the value of the funds invested funds and the significance of the level of profit relative to the size of the business. ROCE is calculated as: Operating profit / Capital employed x 100 = % ROCE 924000 / 3286000 x 100 = 28.119 = 28% A figure of 28 per cent means that for every �1 of funds used by carphone warehouse, 28p profit has been earned. Some of this will have to be paid in tax, some may be paid in dividends to shareholders and some may be retained. This indicates a return of funds borrowed or invested, so the higher the ROCE the better. For me to know if 28% indicates a good performance I will compare it to the previous year's ROCE to see if it has increased. ROCE is calculated as: Operating profit / Capital employed x 100 = % ROCE 888000 / 3183000 x 100 = 27.898 =27% After comparing the ROCE of 2007 to the ROCE of 2006 I can see that the ROCE of 2007 indicates a good performance because the previous year had a lower ROCE. Gross and net profit margins To help a business understand how and why it earned the profit it did, it can examine its profit and loss account more closely. ...read more.

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