* Net profit percentage – This calculation takes the idea of profitability one stage further by actually considering the profit as a percentage of turnover after all the other expenses have been taken out. Looks something like this: Net profit x100 = net profit percentage Turnover * Return of capital employed – This calculation is worked out by considering the net profit as a percentage of the capital employed by that business. The reason this ratio is useful because it shows the amount of money an investor is receiving back on their capital as a percentage. This means they can
Profitability ratios provide an indication as to their success in achieving this aim. They express the profits made in relation to other key figures in the financial statements. Efficiency Also referred to as activity ratios these measure the efficiency with which certain resources have been used within the business. Liquidity/Solvency These ratios measure the ability of the business to meet its current and future obligations. Investment Ratios These are concerned with assessing the returns and performance of shares in the business.
What information can you gain from the business which might help you make your decision? First, you decide to look at the income statement (profit and loss account). In this question you are required to: (a) Explain the purpose of an income statement (profit and loss account) and comment on the usefulness of the income statement in assessing the performance of a business like SportswearKit. (10 marks). The purpose of an 'Income Statement' or another given term 'Profit and loss account' is 'to report on certain financial aspects of transactions that have taken place during an accounting period' (The Open University Book 3, An Introduction to Accounting and Finance in Business', book 3, 3.2, p.39).
If you had one that showed a breakdown by division, how would you use it?". A cash flow statement helps to evaluate performance because: It determines the ability of the company and each division to generate cash flows from operations. “Cash is king” for some analysts. We could see how is the cash for investments being allocated. How is the company financing their new capital expenditures, stocks or debt.
Or Financial statements (balance sheet, income statement, statement of cash flows, and statement of stockholders’ equity) are the primary means accountants use to communicate financial information to investors, creditors, regulatory agencies, and others. Choose one of these financial statements and provide an example of the statement from your current organization, if possible. Provide a brief analysis of what is contained on the statement. The text identified three common legal forms of business organizations: sole proprietorships, partnerships, and corporations. IF you were to start or your business (or if you already have started your own business) what type of legal form would you use?
Berry’s Bug Blasters Ratio Analysis Memo ACC/291 Principals of Accounting II MEMO To: Berry’s Bug Blasters CEO From: Accounting Dept (Team B) Date: September 16, 2013 Re: Ratio Analysis Accounting Team B conducted a ratio analysis of Berry’s Bug Blasters to express the relationships among selected items of financial statement data. Ratios express mathematical relationships between one and another is expressed in terms of percentage, rate, or simple proportion. We used ratios to evaluate liquidity, profitability, and solvency. Listed below are the findings from the ratio calculations. The analyses reveal many things about the company’s financial position and performance, and also which users are interested in each type of ratios.
Financial ratios should be analyzed by a professional accountant. In order to keep a record of the company’s financial health, ratio analysis is used as a tool. Ratio analysis determines and interprets how efficiently a company is working in terms of its finances. Ratio analysis presents a simple and comprehensible understanding of the accounting variables. It is an effective tool for understanding a business’s success in terms of financial undertaking and
In addition, an annual report may contain information about the company's products, facilities, strategies or other topics at management's discretion. This case is an analysis through the fundamental financial statements of two companies. You will want to calculate a number of financial ratios, to analyze the basic financial statements and to highlight significant points underlying trends. In order to understand many of these points you will have to study management's discussion of financial condition and results of operations as well as the notes to the financial statements. Included in this case is the analysis of three companies in the retail business.
Costco Financial Analysis The purpose of this paper is to determine, if investing in Costco stock is profitable or not. To measure how manager effectively use the various source to achieve profit through evaluating the profitability performance ratio. The most important ratios are EPS, return on sales and return on equity. Earnings help stimulate growth and offer stockholders dividends. This paper discusses several aspects that make Costco a stable investment opportunity.
The objectives of management of a business organization are: Primary: To maximize the return on the investors’ capital and at the same time providing for the safety of such resources entrusted to them. Secondary: To be able to discharge its social and legal responsibilities towards its employees, customers, the community and the government. 4. Refer to page 9, par(s) 3 and 4 1-1 Chapter 1 Overview of Management Advisory Services 5. Refer to page 12 6.