find attegementthnak you

1 answer below »
find attegementthnak you
Answered Same DayApr 17, 2021

Answer To: find attegementthnak you

Preeta answered on Apr 18 2021
154 Votes
QUESTION 1:
1. 2018:
Gross Profit Margin = (Gross profit / Total revenue)*100
            = (816000/2195000)*100
            = 37.18%
Net profit Margin = (Net profit / Total revenue)*100
            = (263800/2195000)*100
            = 12.02%
Return on Investment = (Net profit / Total Assets)*100
            = (263800/1835000)*100
            = 14.38%
Return on Equity = (Net profit / Average Shareholders Equity)*100
         =
[263800/{(1003000+795000)/2}]*100
        = 29.34%
Price/Earnings Ratio = Share price/ Earnings per Share
Where, EPS = Net Income/End of period Shares Outstanding.
    EPS = 263800/275400
    = 0.95
Price/Earnings Ratio = 12/0.95
            = 12.63 times
Dividend Yield = (Dividend per share/ Share price)*100
    Dividend per share = 61200/275400
                = 0.22
    Dividend yield = (0.22/12)*100
            = 1.85%
Dividend Payout Ratio = (Dividend paid/Net Profit)*100
            = (61200/263800)*100
            = 23.12%
    2017:
Gross Profit Margin = (Gross profit / Total revenue)*100
            = (697000/1960000)*100
            = 35.56%
Net profit Margin = (Net profit/Total revenue)*100
            = (208500/1960000)*100
            = 10.64%
Return on Investment = (Net profit / Total Assets)*100
            = (208500/1595000)*100
            = 13.07%
Return on Equity = (Net profit / Average Shareholders Equity)*100
         = [208500/{(795000+667000)/2}]*100
        = 28.52%
Price/Earnings Ratio = Share price/ Earnings per Share
Where, EPS = Net Income/End of period Shares Outstanding.
    EPS = 208500/270000
    = 0.77
Price/Earnings Ratio = 8/0.77
            = 10.38 times
Dividend Yield = (Dividend per share/ Share price)*100
    Dividend per share = 60000/270000
                = 0.22
    Dividend yield = (0.22/8)*100
            = 2.75%
Dividend Payout Ratio = (Dividend paid/Net Profit)*100
            = (60000/208500)*100
            = 28.78%
2. The above ratios have been calculated for the company XYZ limited. The ratios are also available for whole industry as a whole and also for the rival company, PQR Company Ltd. Below the comparisons will be made for the company ratios with the industry norms and with the competitive firm to come to the conclusions regarding the profitability of the company.
Gross profit margin shows the initial profitability of the company without considering the operational costs incurred (Stahl et al., 2012). Gross profit just shows the profit a company earns from just selling the goods. Gross profit margin Gross Profit Margin for 2018 is 37.18% and for 2017 is 35.56%. The same ratio is 35.4% for industry and 40.1% for the rival company. So, as per the analysis the ratio of the company has improved over the year. It is better than the industry average yet the ratio of the rival company is better than this company. So, the company is at a profitable position yet it has to better its position to get to a better position than the rival. The sales need to be increased for the improvement of the gross profit margin.
Net profit margin ratio is a very important ratio to depict the financial position of a company (Delen, Kuzey & Uyar, 2013). Net profit margin shows the actual net income earned by a company after conducting its operations. The company must earn enough profit after the sales to continue its operation for the long time. Net profit Margin is 12.02% for 2018 and 10.64% for 2017. The same ratio is 11.2% for industry and 11.3% for the rival company. So, for this ratio the industry ratio and the ratio of the rival company are almost same. The company XYZ had a lower ratio for 2017 but it has improved its position and in 2018, the ratio was even better than the industry and rival ratio. The company has to hold the same position in future to be at an advantageous position. The net profit margin of the company is better than the others than of gross profit margin, which shows that the company has a good control over its fixed costs and the company should continue controlling the...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here