Financial Strategy for Carluccio's Plc

Company Credit Assessment: For the Cartwright Lumber could get 2% discount payment within 10 days from suppliers, but it had taken few purchase discount because of the shortage of funds, while there was no bad record of lagged payment, so the company still owned good credit assessment.

The gross profit margin measures the amount of profits that a company generates from its operations without consideration of its indirect costs. Thehigher thegross profit margin, the greater the efficiency of a company’s operations (Besley & Brigham 2007). It means that the company is generating enough income to cover its operating expenses. On the contrary, a lower gross profit margin indicates that the business is not generating adequate income to cover its operating expenses.

* Another important aspect to be noted is that, although the company has a very low operating profit the

A typical Gross profit margin depending on the industry may be 25 to 30%. Nucor’s Gross profit margin ratio indicates that industry is intense and cost of goods is one of the main of factor in profitability. After examining the five year

One assumption that should be clearly analyzed is that the collection period is of 30 days net. Not always customers have the ability and willingness to pay off their debts in 30 days, some may take more time, and some could incur in bad debt.

Gross profit of 60% has not increased much over past three years it will affect

The ratio expresses the relationship of gross profit on sales to net sales in terms of percentage (Van Horne, Wachowicz & Bhaduri, 2005). Goss profit is the result of the relationship between prices, sales volume and costs. Gross profit margin of Starbucks Corporation is 23% whereas the ratio for McDonald’s is 35%. McDonald’s ratio is high as compared to Starbucks which is a sign of good management. It implies that the cost of production of the firm is relatively low. The McDonald’s has reasonable gross margin which ensures adequate coverage for operating expenses of the firm and sufficient return to the owners of the business, which is reflected in the net profit margin.

The income over the last three years has been fluctuating.. This tells us the company has an initial growth period. Sales also drop between years 7 and 8 and the gross profit margin decreased as well. This may be due to operating expenses. This leads to the prospect of stable future sales. The stakeholders are continuing to back the company and the company does predict sales will remain stable. The modest increase in sales does not show enough to recover without making adjustments to free capital.

Although the company seems to be profitable, it has faced shortage of cash. It happened due to increase in Accounts Receivable as well as Inventories. On the other hand, Accounts Payable does not increase that rapidly and difficulties regarding cash collection become evident. Furthermore, the cash collection cycle becomes larger (59 days in year 2003, while more than 70 in year 2006).

Gross profit is defined as the difference between Sales and Cost of Sales. The gross margin (or gross profit ratio) expresses the gross profit as a proportion of net sales. The gross profit margin ratio measures how efficiently a company uses its resources, materials, and labour in the production process by showing the percentage of net sales remaining after subtracting the cost of making and selling a product or service. It indicates the profitability of a business before overhead costs. The higher the percentage, the more the business retains of each dollar of sales. So: the higher the gross profit margin ratio, the better.

Currently the Brown’s pay back suppliers in the first 10 days, averaging 9.9 days, to receive a 2% discount. This is nearly three times as fast as the industry average of 26.9 days. This doesn’t work well with their current credit terms offered to customers, as their receivable days are averaging at 51 days, which is double the industry average.

The Gross Margin ratio represents the percent of total sales revenue that TCI retains after incurring the direct costs associated with producing the goods and services sold by them. It helps us distinguish, as much as possible, between fixed and variable costs. With a 20%, 15%, or 10% projected increase in sales, for 1996, we calculated TCI’s GM ratio to be 41.85% , and in 1997 to be 41.84%. This means that around 42% of TCI’s sales dollar is available to pay for fixed costs, like its potential long-term debt to MidBank, and to add to profits.

The Gross profit margin stays relatively constant at around 36 %. However, there is a slight rise from 2000 to 2004.

The Net Profit Margin in 2012 was 10.5% while in 2013 it was 66.6%. This increase in the Net Profit Margin can be attributed to the increase in net profits after taxes despite the fact that there was a slight decrease in revenues.

The third ratio mirroring the company’s efficiency is the creditors’ days ratio, which measures, according to Atrill, the number of days in which the business pays its debts to suppliers. Britvic PLC’s financial statements recorded in 2009 a 20 days increase in the above mentioned ratio compared to the 2005-2008 average that had a value of 149 days. Therefore, Britvic PLC paid in 2009 its debts 169 days after the enclosure of the transactions. Taking into consideration the fact that Britvic PLC is operating in the soft drinks industry, which has a medium pace of generating cash, it may be stated that this ratio’s value is high enough to reflect that Britvic PLC is risking the creditors’ goodwill. On the other hand, the company paid its short-term liabilities in approximately four months after receiving the supplies