Evaluate return on capital employed, Financial Management

Assignment Help:

a) Gross profit = $500,000 and Expenses = $100,000 for Year 2.

b) Year 2 GPM = $500k / $1,000k = 50.0%

Year 1 GPM = $400k / $850k = 47.05%

Year 2 NPM = $400k / $1,000k = 40.0%

Year 1 NPM = $360k / $850k = 42.35%

The Year 2 GPM figure shows that for every $100 of sales, $50 is gross profit. The Year 2 NPM figures prove that for each $100 sold, $40 is generated as net profit. While the GPM has improved, NPM (the relatively more important figure for profitability) has declined; due to the large increase in expenses from $90K to $100,000 (11.1% increase). Overall, these figures show healthy profitability at JKL Ltd, although barely limited information is provided.

c) Definition of profitability (not profit): Profitability ratios examine the profit of a firm in relation to other figures, such as sales returns in order to assess the monetary performance of the business. Further information might include: forecast profits and sales figures; or the amount of capital invested in the firm. Other information could include the analysis-off and use:

  • Return on Capital Employed (ROCE)
  • Benchmarking data
  • Looking at profit in relation to the size of the firm
  • Objectives and targets of the organization

Related Discussions:- Evaluate return on capital employed

Restrictions on investments, Restrictions on Investments: A mutual fund...

Restrictions on Investments: A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment

Case let, This case has been framed in order to test the skills in evaluati...

This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision. Perluence International is large manufacturer of petroleum and

Capital raising, how can covered bond affect other secutites price

how can covered bond affect other secutites price

What does it mean if this value were zero, What does it mean when we say th...

What does it mean when we say that the correlation coefficient for two variables is -1? What does it mean if this value were zero? What does it mean if it were +1? Correlation

Calculate the annual revenue - capital budgeting analysis, The Donut Shop, ...

The Donut Shop, Inc. is planning to add a 2nd Donut Shop by opening a new store across from Webster University. A survey of the area has already been completed at a cost of $150,00

Determine stock turnover, a)   Year 2 Year...

a)   Year 2 Year 1   Stock turnover (350/500) * 365 = 255.5 days (250/450) * 365 = 202.7 days

Determine primary variables being balanced in the eoq, What are the primary...

What are the primary variables being balanced in the EOQ (Economic Order Quantity) inventory model?  Explain The primary variables being balanced in the EOQ (Economic Order Quant

Project, AThe project is expected to have an initial outlay of $200million ...

AThe project is expected to have an initial outlay of $200million and generate cash inflows of $64million for the next 12 yearssk question #Minimum 100 words accepted#

Calculate the interest value , 1. Suppose a firm's tax rate is 35%. What af...

1. Suppose a firm's tax rate is 35%. What affect would a $10 million operating expense have on this year's earnings?  What effect would it have on next year's earnings? 2. What

Explain the importance of supplier appraisal, QUESTION (a) List the fiv...

QUESTION (a) List the five elements of the purchasing mix. (b) Describe briefly the four essential elements of a legally binding contract. (c) Distinguish between perform

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd