Reference no: EM133114052 , Length: word count:280

Case Scenario - Wazir

A friend, Wazir, has asked you for advice because he understands very little about accounting statements. His accountant has prepared the following summary of the last three years results of Wazir' shoe business:

                                                                  20X6                      20X5                      20X4

                                                                     £                             £                             £

Revenue	286,860		256,496		260,241
Cost of sales	193,458		172,188		174,841

Gross profit	93,402		84,308		85,400
Expenses:
Premises costs	(23,298)		(16,277)		(16,141)
Staffing costs	(18,265)		(18,203)		(16,279)
Administration cost	(10,761)		(10,240)		(10,186)
Net profit	41078		39588		42794

Wazir tells you that in the early months of 20X5 a discount shoe operation opened near his shop. His sales suffered at first because of the competition, but after about 8 months the rival went out of business. Wazir decided, however, that he had better extend the range of inventory carried and also increase the floor area of the selling space so as to build up revenue. Since the end of 20X5 he has rented additional showroom and storage space from the business next door.

Wazir would like you to explain to him the impact of these events on his business performance.

Question 1: Calculate his gross and net profit margins and

Question 2: Write a brief report.