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Calculate the key profitability ratios for the years

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Reference no: EM133002825

Analyse the key profitability ratios and identify the reason for the change in them by answering the following questions.

Note the following assumptions for solving this question:

  1. The key profitability ratios are Variable Margin (as a % of sales), Operating Margin, Return on Equity and Return on Average Capital Employed.
  2. Assume that there is no change in the capital employed during the year 2002 so that the capital employed at the beginning of the year is the same as that during the ending of the year.
  3. The gross profit is also known as the variable margin.

Problem 1: Calculate the key profitability ratios for the years 2002 to 2006(E).

Problem 2: What is the trend in RoE from 2002 to 2006(E)? List down at least one reason for the increase/decrease in RoE by assessing the drivers of RoE.

Reference no: EM133002825

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