Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
a) Gross profit shows the difference between a firm's sales revenues and its direct cost of sales (COGS). Net profit, however, is calculated after deducting overheads (expenses) from the gross profit figure, i.e. it considers both indirect and direct costs in the calculation of profit. Gross profits will, therefore, always be greater than Net profits.
b) Note: SL students are not expected to use the Earnings Per Share ratio in this question.
Ratio
Firm
Commentary
GPM
Pia
Gross profit has fallen by 20% (from GPM of 50% to 40%).
Hayman
Gross profit has fallen by just 10% (from GPM of 50% to 45%); therefore Hayman has performed better in terms of its ability to control COGS.
NPM
NPM is stable at 20% but this means with a reduced GPM that overhead control is improving; overhead accounted for a 30% differential (comparing GPM and NPM) but only 20% by the Year 3.
NPM has improved by 5.2% and is quite stable. Hayman's ability to control overheads has also improved but Pia performed better.
ROCE
Fall in ROCE of 6.7% but the rate is still quite attractive at 14% return.
Improved by 25% thereby seems very attractive if performance can be maintained. Hayman's ROCE overtakes that of Pia in 3rd year and seems attractive at 15% return.
Quick ratio
High acid test ratio in Years 1 and 2; seems to have improved with the ratio falling to 1.5 (although we have no information about the type of industry that Pia operates in).
Fluctuating acid test ratio that is close to the minimum recommended of 1:1 so liquidity issues at Hayman could be a concern for some investors.
EPS (HL)
Improving EPS ratio will tend to attract investors (Pia's EPS has increased by 40% in the given time period).
Declining EPS ratio may drive away investors in the long term, especially since the EPS has fallen by 33%.
c) It is important for potential investors to consider non-financial factors when making investment decisions because not all options are made on quantitative grounds. For example:
What are the primary variables being balanced in the EOQ (Economic Order Quantity) inventory model? Explain The primary variables being balanced in the EOQ (Economic Order Quant
To whom it may concern, I wanna someone to help me to get prepared for my exam. is it possible to work together? 1. Managerial Aspects of the Market for Foreign Exchange
Mergers and Acquisitions It is a Process of business combination. There are 3 forms of business combination: 1. M1. M1 has the highest liquidity. This is the narrowest t
Why would an analyst use the Modified Du Pont system to calculate ROE when ROE may be calculated more simply? Explain. In fact, an analyst wouldn't use the Modified Du Pont eq
what is future value
Q. Example on interest rate movements? Cap/floor volatility is consideration to be higher than swaption volatility because the market buys volatility trough swaptions as well a
What do you understand by financial viability of the organization? 2 : Define Following accounting and financial terms: Asset Liability Equity Income Expense
I am facing some problems in my assignment of Liquidity Mix. Can anybody suggest me the proper explanation for it?
How exchange of principal and interest in one currency? Expalin
how would you incorporate currency exchange risk into the capital budgeting process of foreign investment.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd