Interpreting Financial Results Essay

Open, View, and/or
Download this Document

Total Length: 940 words ( 3 double-spaced pages)

Total Sources: 2

Page 1 of 3

Finance

Assessing the Financial Performance of ABC SDN. BHD using Ratios

ABC SDN. BHD. appears to have had a difficult year in 2010. The firm can be assessed using the consolidated accounts, with ratio analysis to assess the current position of the firm comparing this current performance with the previous years. When assessing a firm it is important to look not only at potential trends and patterns in the firms' performance, but consider this in a broader context, including performance against industry benchmarks.

Ratios may be used to measure different aspects of the firms' performance, including profitability, efficiency and liquidity. A primary concern of business and of significant interest to shareholders is the profitability of the firm. There are different profitability ratios generally used, the two most important at the gross profit margin and the net profit margin.

The gross profit margin is the revenue less the direct costs (cost of goods sold), expressed as a percentage of the revenue. An initial look at the gross profit margin, which shows it increases from 10.78% in 2009 to 14.48% in 2010, may appear positive, and it does indicate some operating improvements, with a relevant reduction in the direct costs. However, when looking at the components of the equation the picture is not as positive. While the percentage has increased, both the level of revenue used to create the profit and the actual gross profit have decreased; the total revenue earned in 2010 showed a significant decrease falling by 39.13%.

Stuck Writing Your "Interpreting Financial Results" Essay?

View All Our Example Interpreting Financial Results Essay

Have A Custom Example Essay Written

This is notable as the accounts also state that no major changes took place in operations. This may be a cause for concern.

Table 1; Gross profit margin

2009

2010

Revenue (a)

200,062,000

121,777,000

Cost of goods sold (b)

178,500,000

104,145,000

Gross Profit (c) (a-b)

21,562,000

17,632,000

Gross profit margin (c/a)*100

10.78%

14.48%

The most important profit figure will be the net profit margin. The net profit margin (after tax), as this is the profit after all costs and other items, and is the bottom line for investors, and is one of the figures they are most interested in. The net profit and the net profit margin both show a decrease in 2010. The figure may indicate a potential problem, when it is considered that of the net profit figure included a significant level of profits from an acquisition.

Table 2; Net profit margin

2009

2010

Revenue (a)

200,062,000

121,777,000

Net profit after tax (b)

3,963,000

1,881,000

Net profit margin (b/a)*100

1.98%

1.54%

The net profit margin falls from 1.98% to 1.54%. This places the firm below the logistics industry average which is 2.78% (MSN Money, 2013). The fall in both revenues and profit may be a cause for concern, so it is necessary to look at other measures, such as efficiency and liquidity.

The return on assets indicates the.....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Interpreting Financial Results" (2013, September 08) Retrieved June 5, 2026, from
https://www.aceyourpaper.com/essays/interpreting-financial-results-95821

Latest MLA Format (8th edition)

Copy Reference
"Interpreting Financial Results" 08 September 2013. Web.5 June. 2026. <
https://www.aceyourpaper.com/essays/interpreting-financial-results-95821>

Latest Chicago Format (16th edition)

Copy Reference
"Interpreting Financial Results", 08 September 2013, Accessed.5 June. 2026,
https://www.aceyourpaper.com/essays/interpreting-financial-results-95821
   

Open, View, and/or
Download this Document
order custom essay example