ProblemThe manager of the company X would like to check the evolution of Profit rate for 2successive months.In order to adopt concrete improvement solutions, he wants to know:Exactly how much the profit rate changed during the 2 successive monthsThe manager wants to know the exact causes of this change and the extent to whichthey have led to declining profit ratioMore exactly he wants to know how and what are the influences of revenues, expensesand turnover on the change of this ratioRp=Profit / Turnover *100 = (Revenues-Expenses)/Turnover *100Revenues: R1=10,000 lei, R0= 11,000 leiExpenses: El= 8,000 lei, E0= 7,000 leiTurnover: T1= 6,000 lei , TO =5000 leiProfit ratio: Rp1=33% Rp0=80%

Profit ratio refers to the financial ratio that is helpful in estimating the financial position of…

Answered: Problem The manager of the company X…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter13: Financial Statement Analysis

Section: Chapter Questions

Problem 13.6DC

See similar textbooks

Similar questions

A Using Common Size Statements The following income statement and vertical analysis data are available for Riley Manufacturing: Required: 1. CONCEPTUAL CONNECTION Suggest why net income declined from $273,200 to $41,600 while the cost of goods sold percentage decreased each year and selling and administrative expenses remained nearly constant. 2. CONCEPTUAL CONNECTION Determine what could cause sales to decline while the gross margin percentage increases.
Based on the attached image, how would each of the following measures be affected if sales rise by $5,000? a. ROI: increase; Asset turnover: increase; Profit margin: increase b. ROI: decrease; Asset turnover: decrease; Profit margin: decrease c. ROI: increase; Asset turnover: decrease; Profit margin: increase d. ROI: increase; Asset turnover: increase; Profit margin: no change
1. EGGS presented its quarterly report in terms of performance. Indicators such as Revenue have increased by 10% and material purchase cost have decreased by 10%. According to this outcome the CEO of the company should be happy. However ,CEO’s main concern was that the company didn’t have enough money on hand when it wanted to invest. Explain what KPI they should measure in order to see a complete picture and how they can improve this KPI.
Ratio analysis of a company’s performance as shown in its profit and loss account may show a decline in profit margin (gross profit as a percentage of sales revenue) compared with the previous period. Required: Give five possible reasons for a decline in gross profit as a percentage of sales revenue from one year to the next, briefly explaining for each why it has the effect of reducing the percentage. Note: You are not required to consider factors, which reduce gross profit itself, only those that reduce the gross profit percentage of sales.
If a company’s current ratio declined in a year during whichits quick ratio improved, which of the following is the mostlikely explanation?a. Inventory is increasing.b. Inventory is declining.c. Receivables are being collected more rapidly than inthe past.d. Receivables are being collected more slowly than inthe past.
The Protek Company has been growing very fast, but profitability has declined from 11.85% to 2.36% in just two years. Costs have increased faster than sales and expenses are out of control. The Board of Directors has appointed Bob Smith to come up with some recommendations that are likely to help get the situation under control. He has made the following suggestions, but has hired you to actually put the numbers into proforma statements to present to the Board at their next meeting. Income Statement The company will slow down the growth of sales to 15% for the next year (20X4). Bob does not see any easy fixes to the cost of good sold situation, so those will go up 15% in line with sales, leading to the same gross margin percent as this past year. Bob has decided that the budgets for the Marketing and Research and Development departments should be exactly the same dollar amount as in 20X3. He feels that imposing that particular discipline to the Marketing Department will be good for…
A firm’s balance sheets for the last two years are as follows (refer to image): Sales in 20X1 were $250,000. Sales in 20X2 were $250,000. a. Based solely on the current ratio and the quick ratio, has the firm’s liquidity position deteriorated or improved? b. Without doing a calculation, has days sales outstanding (receivables turnover) improved? How do you know? c. Without doing a calculation, has inventory turnover deteriorated? How do you know? d. If the firm earned $5,000 during 2012, what proportion of those earningswere distributed?
I am resubmitting this question as I am getting flagged that there is information missing. Losses have been incurred at Millard Corporation for some time. In an effort to isolate the problem and improve the company’s performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented statement is given below. This statement is for May, the most recent month of activity. Sales Region West Central East Sales $ 311,000 $ 803,000 $ 699,000 Regional expenses (traceable): Cost of goods sold 95,000 243,000 317,000 Advertising 103,000 244,000 235,000 Salaries 52,000 51,000 107,000 Utilities 8,800 15,600 14,400 Depreciation 25,000 31,000 27,000 Shipping expense 12,000 29,000 39,000 Total regional expenses 295,800 613,600 739,400…
Return on investment, Margin, Turnover Ready Electronics is facing stiff competition from imported goods. Its operating income margin has been declining steadily for the past several years. The company has been forced to lower prices so that it can maintain its market share. The operating results for the past 3 years are as follows. For the coming year, Ready's president plans to install a JIT purchasing and manufacturing system. She estimates that inventories will be reduced by 70 % during the first year of operations, producing a 20% reduction in the average operating assets of the company, which would remain unchanged without the JIT system.She also estimates that sales and operating income will be restored to Year 1 levels because of simultaneous reductions in operating expenses and selling prices. Lower selling prices will allow Ready to expand its market share.(Note : Round all numbers to two decimal places.) Required : 1. Compute the ROI, margin, and turnover for Years 1, 2…
a. The following information from a business article titled, “PLDT cuts full-year profit forecast after third-quarter results disappoint” was posted on Interaksyon.com (Date accessed: March 11, 2015) on November 4, 2014. From the article, PLDT management reported that PLDT’s 2014 third-quarter net income was down to P7.9 billion in the same period in 2013. “Our third quarter results reflect intensifying competition in the cellular space of our business, to which we have taken measures to respond to competition and stabilize our share of market. Smart, Sun and Talk N’ Text undertook to match or neutralize price aggression on the prepaid front, effectively lowering price points for the same level of activity”, “Manuel V. Pangilinan*, PLDT Chairman said*.” “Based on this market assessment and on the information available to the company, PLDT is revising its profit guidance for the full-year to P37 billion from the P39.5 billion previously disclosed,” Mr. Pangilinan said. Question:…
Suppose that a company has experienced two years of declining ROI. Give an example to show how data analysis from two different perspectives of the Balanced Scorecard could be used to diagnose why the ROI is declining.
A service company has the following financial information (in millions of $)a. What is the profit leverage effect of reducing the cost of the facilitating goods in this company?b. It has been suggested that the in-house services costs could be reduced by 10 percent in the coming year by implementing lean systems. What effect would thisohave on earnings increase in percentage?c. What is the profit leverage effect of in-house services relative to profits?

SEE MORE QUESTIONS

Recommended textbooks for you

Financial Accounting: The Impact on Decision Make…

Accounting

ISBN:

9781305654174

Author:

Gary A. Porter, Curtis L. Norton

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

College Accounting, Chapters 1-27

Accounting

ISBN:

9781337794756

Author:

HEINTZ, James A.

Publisher:

Cengage Learning,

Financial Accounting: The Impact on Decision Make…

Accounting

ISBN:

9781305654174

Author:

Gary A. Porter, Curtis L. Norton

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

College Accounting, Chapters 1-27

Accounting

ISBN:

9781337794756

Author:

HEINTZ, James A.

Publisher:

Cengage Learning,

Entrepreneurial Finance

Finance

ISBN:

9781337635653

Author:

Leach

Publisher:

Cengage

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

Excel Applications for Accounting Principles

Accounting

ISBN:

9781111581565

Author:

Gaylord N. Smith

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS