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

Calculate amount of first coupon payment your organization, Your firm has p...

Your firm has presently issued five year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%.  What is the amount of first coupon payment your organization will pa

Cost of capital, ABC Ltd. Produces electronic components with a selling pri...

ABC Ltd. Produces electronic components with a selling price per of Rs.100. Fixed cost amount to Rs.2,00,000/- 5000 units are produced and sold each year. Annual profits amount to

Acquisition strategy, T he acquisition strategy The most important str...

T he acquisition strategy The most important strategic consideration is the size of the acquisition. The completion of smaller series should be considered in the beginning tha

Explain about pink book, Q. Explain about pink book? This shows the var...

Q. Explain about pink book? This shows the various sub heads under which the lum sum amount sanctioned by allotment is to be spent and this indicates the works for which the al

Understand by the term government policy agenda, Question 1: Give an ac...

Question 1: Give an account of the role of governmental bodies and officials in the making of public policies. Question 2: What do you understand by the term "Governmen

Explain the advantagesand disadvantages of mbo, Explain the Advantagesand d...

Explain the Advantagesand disadvantages of MBO Advantages of MBO Disadvantages of MBO Sale can be arranged quickly   Manag

Define swap broker, Define Swap Broker A swap broker arranges a swap am...

Define Swap Broker A swap broker arranges a swap among two counterparties for a fee with no taking a risk position in the swap.

Explain dual currency bond, Explain Dual Currency Bond A dual currency ...

Explain Dual Currency Bond A dual currency bond is a straight fixed-rate bond that is issued in one currency and pays coupon interest in that similar currency.  At maturity, th

Determine the key points in the turnbull report, Key points in the Turnbull...

Key points in the Turnbull Report: Have a defined process for review of effectiveness of internal control. Review regular reports on internal control. Consider key

Explain the post-acquisition integration plan, Explain the Post-acquisition...

Explain the Post-acquisition integration plan Post-acquisition integration plan Keep  all  channels  of communications open,  by  includin

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