Hudson Bay Case

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.

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.

When analyzing current ratio and quick ratio we can say that the company’s liquidity is efficient enough to pay off its currents debts, since the trend for the period stayed fluctuating around the same percentages. Meanwhile, accounts receivable followed a negative trend, meaning that the company’s days of accounts receivable increased showing that they are having a hard time collecting receivables in a timely manner. In addition, inventory and accounts payable turnover increased over the first three years, showing in one hand the inefficiency of the company at selling inventory and on the other hand that they are making payments faster to the supplier which is a sign of their improving financial conditions. The last item under liquidity ratio is cash conversion cycle, showing a deteriorating trend, which confirms the effectiveness of a company’s management converting cash on hand into inventory to sales and sales back into

Gross profit margin reflects the amount of revenue from sales that is left for profit and to pay other expenses after the cost of the goods sold is subtracted. This margin is roughly equivalent to the markup on a product and reflects the amount over cost the company is able to charge. Firms in retail can usually increase their gross profit margin if they can differentiate themselves from their competitors and charge a higher price for roughly equivalent products.

Liquidity ratios shows the ability of a company to pay off short term obligated debts and fulfill the requirements of cash for unexpected events [1]. The comparison of the liquidity ratios of several individual companies is meaningful, only if those companies are in a same industry and legal system. In the rest of this part, we are going to discuss more details about working capital and current ratio which are 2 key indicators for displaying the liquidity of companies

Current ratio: Current ratio is the ratio of the current liabilities in terms of current assets of a business. This ratio determines the firm’s ability to meet out its debts over the coming period of 12 months. The firm 's ability and market liquidity to meet demands raised by creditors is indicated by this ratio. If a company 's current ratio falls within 1.5 to 2, then it indicates good short-term financial strength.

The company's current ratio is 6.1, or its assets exceed its liabilities by six times. This figure varies by industry, but shows that the company is liquid enough to meet its needs.

Current Ratio: It defines cash resources as all current assets. It measures the firm’s ability to meet its current obligations. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. The higher the current ratio, the more capable the company is of paying its obligations.

Gross profit margin = (gross profit for the year ÷ sales for the year) × 100

Current ratio measures the liquidity ratio of a company’s obligation to pay short-term and long-term obligation. According to the financial report from Ajinomoto (Malaysia) Berhad, the current ratio of the company is at a good standing as in 2014, they manage to have a ratio of 5.71:1 in terms of paying obligations. This means that for every single unit of liability the company

A Liquidity Ratio that measures Jayadiri’s ability to meet/ pay its short term financial obligations. The ability is gauged by considering the company’s Total Current Assets both liquid and illiquid, relative to its Total Current Liabilities. The higher the ratio, the more capable Jayadiri is in paying all its short term obligations as it has larger proportion of asset value relative to the value of its liabilities. From the workings, Jayadiri is in a reasonably good liquidity as it has sufficient current assets to pay all its current liabilities when they fall due i.e. with a ratio of 1.61 (in 2015) and 1.59 (in 2014).

The gross profit margin of the comany shows on the year 2014 -19-48, in 2013 - 17.38 , and in the year 2012 - 18.39. The grossprofit of the company has improved in the year 2014 compared to others.

The first step in analysis liquidity is to calculate the company’s current ratio. It provides information about how many times the company can pay the current debt based on its assets. This ratio is the most accrued measure. The ratio is a measure of the short-term liquidity for a company. A high current ratio means that the company is able to pay its current obligation.

Wally Amos needs statement of cash flows to analysis Biscuit Jacob’s cash position and net amount of cash at end of period. Statement of cash flows shows the net increase or decrease in cash due to the effects of Biscuit Jacob’s operating, investing, and financing activities. Thus, Biscuits Jacobs should have a net increase in cash and higher amount of cash at end of period to show its cash and cash equivalents are remained healthy. Besides, Wally Amos needs balance sheets to analysis the Biscuit Jacob’s financial position and liquidity. Through balance sheets, Wally Amos can use current ratio, which is calculated by dividing current assets by current liabilities, in order to evaluate the liquidity of Biscuits Jacobs. Liquidity refers to the ability of Biscuit Jacob to pay obligations when it became due. A higher ratio is favourable as it means Biscuits Jacobs has more current assets to meet its current liabilities. Balance sheet also shows whether Biscuit Jacob’s cash on hand is enough to meet its current liabilities at the point of

Gross profit margin is an indicator of a company’s financial health to measure how much income is kept after subtraction of cost of goods sold per revenue. If the company fails to have high above average gross margin throughout the years, it clearly means that company’s flexibility for investments after operating costs is too limited to have a sustainable business. Shell’s gross profit margin falls %1.7 last two fiscal years that shows the company has problems about the cost of sales which is directly affected by raw material prices. In order to have more gross profit company needs to decrease its’ ending inventory.