Outdoors PLC: Executive Summary

The gross profit margin and operating profit margin also suffered at 29.5 % (23.49%) and 5.8% respectively (Morning Star, 2014).

Net Margin is the ratio of net profits to revenues of a company. It is used as an indicator of a company’s ability to control its costs and how much profit it makes for every dollar of revenue it generates. Net Margin is calculated using the formula: Net Margin = (Net Profit / Revenues ) * 100 Net margins vary from company to company with individual industries having typically expected ranges given similar constraints within the industry. For example, a retail company might be expected to have low net margins while a technology company could generate margins of 15-20% or more. Companies that increase their net margins over time generally see their share price rise over time as well as the company is increasing the rate at which it turns dollars earned into profits.

Profit margin ratio is the ratio between net income and net sale. This ratio discloses the earning capacity of the business. Higher profit margin ratio ensures high return to the owner or shareholders. It also helps in the growth of the business. Profit margin ratio of Peyton Approved is 53.44%, which is excellent and shows that company is has a good prospects in terms of

The profit margin ratio demonstrates the ability of a company to increase the percentage of net income earned for every dollar of sales. For example: “this ratio shows the percentage of each sales dollar earned as net income”. (Harrison Jr., Horngen, Tomas, 2013) The Hershey Company was able to increase the profit margin ratio from 10 percent in 2012 to 11 percent in 2013. The increase in profit margin from the previous year 2012 shows that the performance of the company is increasing which means that revenue is increasing or expenses are decreasing. Furthermore, The Hershey Company is managing their performance efficiently and this is directly reflected in profit margin ratio.

The 5 year average for Operating Margins is 15.61% over the industry average of (-2.22%). I would once again reference that the operating margins are high because of HD’s foot hold in their industry which is also echoed in their Net Profit margin ratio of 7.86% over the industry comparison of (-0.48%). Comparisons for Pre-Tax Margin Ratios are 12.5% to the industries (-0.46%). This is a good indication

In general there are 10 ratios that govern the finances of an organization. But, we have been given only three ratios though all the ratios are essential because they acquire nearly 90 percent of the information contained in the financial statements. These can be any but we have to choose the best three that certainly makes the difference. The major three ratios would be the operating margin, it is an essential ratio that deals with the organization’s profitability

The profit margin ratio is interpreted as reflecting the percent of profit in each dollar of sales. So in Season 1, we had a 73% profit margin for every dollar in sales, and in Season 2, we had an 85% profit margin for every dollar of sales. Since profit margin is an indicator of a company's pricing strategies and how well it

Net profit margin ratios is sales into net income, a reflection of how well sales have done once you take expenses out of the equation.

In terms of industry profitability, it appears that profit margins have a tendency to fall. This is because competition is high and customers tend to buy low-priced high-value items. The average gross margin and net profit margin is 37.1% and 14.3%, respectively (MSN Money, 2010).

The gross margin provides information about how much it costs to produce the product. Another profitability ratio is the net profit margin. The net profit margin is calculated by dividing the net profit by revenue. Lowe’s net profit margin for 2016 is 0.43. The gross profit margin takes into consideration profit before expenses are deducted whereas the net profit margin uses the profit after the expenses have been deducted.

During the period 2012 and 2013, the Operating profit margin decreased from 9.2% to 5.7%. This slight decline can be attributed to the decreased revenues and the increase in tax expenses.

Operating profit margin figures in the table above show the return from net sales[13]. However profit margin ratios are high enough for the 3 years, there is a fall from 12.86% to 11.26% during 2011-12. Sales revenue increases with a higher rate than gross profit so there is a poor

Operating profit margin and gross profit margin are the most commonly used ratios used to compare profitability. Gross profit margin only uses the direct costs of production, whereas operating profit margin factors in both direct costs of production and overheads giving a more accurate representation of profitability and is a strong indicator of a company’s long term ability to survive and grow, however comparing the two will help determined which departments need improving (J.B Maverick, date unknown). Nexts operating profit margin for 2015 is 20.30% which is a 0.97% increase from the previous year, this could be due to a decrease in overheads or direct costs of production, again this beats Nexts main competitor Debenhams ratio of 5.77% making Next the more appealing choice for investors. Next have also experienced a growth in gross profit margin of 0.43% from 33.16% in 2014 to 33.59% in 2015, this increase proves that next has managed its direct costs better and have been able to increase its revenue, also this increase will provide reassurance to investors that their investment is safe. This ratio is also bigger than competitor Debenhams which only managed a 12.88% gross profit margin in 2015. Nexts increase in both profit margins is even more impressive due to the national minimum wage increasing by 19p

Used to determine the competitive strength and cost effectiveness of a company, the operating profit margin shows what percentage of a company’s revenue is left over after covering variable costs. It is the operating profit divided by the net sales. Essentially, the operating profit margin depicts how much a company makes on each dollar of sales.

In 2009, the operating profit was 3.56% which was slightly above than the previous year. After deducting all the expenses, the left amount is the net profit and the proportion of net profit in respect to total revenue is the net profit margin. Sainsbury’s net profit margin for the years 2009, 2008 and 2007 were 1.53%, 1.84% and 1.89% respectively. The management thinks that the tough market condition and the other competitors with very cheap pricing have pushed them to squeeze their profit margin ratio. The graph below shows the Return on Capital Employed as well. The ROCE gives the idea about how much return a company is making on its used capital. (investorwords.com) The ROCE for the company was 9.46%, 7.10% and 7.59% for the years 2009, 2008 and 2007 respectively. The year 2009 proved to be a little bit more in context of return on capital employed.