MANAGING FINANCIAL AND STATISTICAL DATA

Managing Financial and Statistical Data

Managing Financial and Statistical Data

Part A: Calculation of Financial Ratios

Gross profit margin

To measure the profitability of a project, business, gross margin is the benchmark. The gross margin is calculated based on the turnover and can therefore provide a good allocation of resources. First, we must know that there is no standard definition of gross margin. Everyone is free to put the pieces he wants behind the concept. However it is often said that gross margin is the selling price minus the VAT cost. If the gross profit margin of the company is increasing it is good for the company (Pizzey, 2004: 89). The gross profit margin of Crosville Motors is increasing from 28.98 in 2010 to 40.13% in 2011. This is a very good increase and for the investors it is termed as a very good indicator but in 2010 it has fallen from 40.13% to 39.37% which is a danger signal for the company but still it can be taken as positive because the overall trend of the company's gross profit margin is increasing.

Efficiency Ratios

The main purpose of efficiency ratios is to calculate that how efficiently the company's resources are being used and how efficiently it is managing its receivables and the liabilities. The efficiency ratios calculated for the Crosville Motors are average stock turnover ratio, average settlement period for Debtors, average settlement period for creditors and Sales revenue to capital employed.

Year

2010

2011

Efficiency ratios:

 

 

Average stock turnover period

6.95days

6.85days

Average settlement period for debtors

42days

42days

Average settlement period for creditors

81days

79days

Sales revenue to capital employed

1.22times

1.22times

Liquidity Ratios

The liquidity ratios are used to judge the ability of a company to meet its short-term obligations, since they can get a lot of evidence about the solvency of the company's current cash and ability to remain solvent in the case adverse situations. In essence, we compare the short-term liabilities Short-term resources available to meet those obligations. It is assumed that the larger the ratio, the greater the company's ability to pay its debts. However, this ratio should be regarded as a crude measure of liquidity because it considers the liquidity of the individual components of current assets.

year

2010

2011

Liquidity ratios :

 

 

Current ratio

2.01

3.26

Acid test ratio

1.96

2.7

Current ratio

It gives an overall assessment of the liquidity of assets, indicating how many rubles current assets of an enterprise accounts for one ruble of current liabilities. The logic of calculating this indicator is that the enterprise has short-term liabilities primarily due to the current of assets, and hence if current assets exceed the largest obligations, the enterprise may be regarded as successfully functioning (at least theoretically).

Value of the index can vary by industry and activity, and its smart growth in the dynamics is usually regarded as a favourable trend. In the western accounting and analytical practice is a critical lower value of the index - 2, but this is only the orientation of value indicating whether the order parameter, but not on its precise normative value.

Gearing Ratio

The gearing ratio measures the contribution of company's long term funding towards ...