M3: interpret the content of trading and profit and loss account and balance sheet for a selected company, explaining grow accounting ratios can be used to monitor the financial performance of the organisation.
This report is going to illustrate state of given business. The business that this report is going to illustrate the finance state is Tesco plc, the report will compare and explain each aspects of the Tesco plc’s balance sheet.
A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.
Gross profit margin
The gross profit margin is the overall profit that Tesco plc has made in a year. This is calculated by the gross profit divided by the sales and then multiplied by the 100 to change in to a percentage. For example:
Gross profit/sales x 100 = gross profit margin
This is because it shows the shareholder what Tesco plc’s profit is in a percentage, as this will make it easier for shareholder to know if the business is right organisation to invest in. the calculation below will show the gross profit margin of Tesco plc from the balance sheet.