SPL Analysis Flashcards
Gross margin calculation?
(Gross profit/Revenue) * 100%
Operating profit margin calculation?
(Operating profit/Revenue) * 100%
Net profit margin calculation?
(PFY/Revenue) * 100%
If gross margin has gone up?
Selling price per unit has gone up
Cost per unit has decreased
Reasons for cost per unit decrease? (gross margin)
Bulk purchases, quantity discount
New supplier, cheaper cost and better margin
Increased purchasing power, dictating prices to supplier
Technology changes increasing efficiency
Reasons for selling price per unit increase? (gross margin)
Increase in demand
Shortage of supply
New higher margin product that has better quality
Operating profit margin decrease reasons?
Increased maintenance costs
New premises
New product from launch costs
Impairment (e.g. head office losing value)
Restructuring (closing part of business)
How to calculate capital employed?
Equity + Net debt
How to calculate asset turnover?
Revenue / Capital employed
How to calculate return on capital employed?
(PBIT / capital employed) * 100%
Breakdown equation for return on capital employed
(PBIT/Revenue) * (Revenue/Capital employed) * 100%
What is asset turnover?
Allows users to see how well business is using its assets to generate revenue
What represents net debt? (Interest bearing)
Debentures
Bank loans
Finance/lease liabilities
What is return on capital employed?
Allows users to see ifa business has performed better/worse than in the prior year
What does return on capital employed allow?
Comparison of different businesses in a similar industry regardless of size
