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Unformatted text preview: perating profit margin Operating profit x 100% (120/600) 20.00% (60/600) x 10.00% Sales revenue x 100% 100% Gearing ratio Total longterm borrowings x 100% [300/(231 56.50% [(450/(327 57.2% Share capital plus reserves + + 300)] x + 450)] x lo ngterm borrowings 100% 100% Additional ratios could have been calculated and these might have offered a fuller picture. The ratios reveal that there has been a 10 per cent reduction in the gross profit margin; it has halved. Though annual sales revenue has remained constant over the twoyear period, there has been a significant increase in the cost of sales during the current year. Annual expenses have remained unchanged over the twoyear period and so the decline in gross profit margin is has been reflected in a similar decline in the operating profit margin. The fall in...
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- Spring '08