profitability ratios Flashcards
how do calculate percentage gross profit on turnover
gross profit / sales x 100%
what do u compare percentage gross profit on turnover to
compare to previous year
do u wat the percentage gross profit on turnover to increase pr decrease from last year to this year
it must increase as it shows what % of selling price is available to cover operating expenses
if percentage gross profit on turnover decreases what does it mean happened
Sale prices incorrectly marked
marked toomuch trade discount
goods are sold for less than mark-up policy(stick clearance sales)
percentage gross profit on turnover decreases
what wold you recommend
Check pricing
Avoid too much trade discount
how do calculate percentage gross profit on cost of sales
gross profit / cost sales x 100%
what should percentage gross profit on cost of sales be
it should be the mark up of the buisiness
what d u compare percentage gross profit on cost of sales to
compare to mark up policy
compare to previous years
do u want percentage gross profit on cost of sales to be greater than or less than mark up
it must be the same or greater
what re te possible reasons if percentage gross profit on cost of sales is lower
prices incorrectly marked
toomuch trade discount
goods are sold for less than mark-up policy
if percentage gross profit on cost of sales is lower what woud you recommend
Check prices of goods
Avoid giving too much discounts
how do calculate percentage operating profit on sales
percentage operating profit / sales x 100%
what does percentage operating profit on sales show
it shows how much of sale sis left over as a profit after subtracting expenses
if percentage operating profit on sales is high or low what does it mean
high %- managing expenses well
low% - not managing expenses well
what dow we compare percentage operating profit on sales to
to last years % to see whether the business is improving
what if the percentage operating profit on sales is low
what’re reasons for this
A large amount of income is used to pay expenses
what would you recommend if percentage operating profit on sales is Low
Increase control over expenses
how do calculate percentage net profit on sales
net profit / turnover x100%
what does net profit on sales show
its shows how efficiently the business is being managed
what should you compare net profit on sales to
to the previous years %
what should the % net profit on sales be
it should not be lower than 1/3 % of gross profit percentage
what is a reason if % net profit on saleS IS LOW
EXPENSES ARE TOO HIGH
if % net profit on sales decreased what would you recommend
?expenses must be better managed
?reduce the loan to decrease interest (pay off the loan as soon as possible)
how do calculate percentage operating expenses on sales
operating expenses/ turnover x100%
what does %operating expenses on salesbshow
it show the part of gross profit on sales that is used for operating expenses
what do u compare percentage operating expenses on sales to
and wha whole the % be
compare to last year
it should be the same or decreased as last year
if percentage operating expenses on sales is higher
what could be the reason
there was poor control over expenses
what would you recommend if percentage operating expenses on sales is higher
should be control over costs.
advertising should be in relation to sales
