We'll use the Carphone Warehouse's results to demonstrate these new ratios.
Source:
http://www.bized.co.uk/
Consolidated Profit and Loss Account | 31 March 2001 | 25 March 2000 |
---|---|---|
£'000 | £'000 | |
Profit before interest and taxation | 45,012 | 25,300 |
Total Fixed Assets | 396,175 | 100,279 |
Net current assets (liabilities) | 93,180 | -2,660 |
Fill in this table and calculate the ratio values:
ROFA For the Carphone Warehouse | |||
---|---|---|---|
31 March 2001 | Profit before Interest and Tax Fixed Assets | ___________ | = _____% |
25 March 2000 | Profit before Interest and Tax Fixed Assets | ___________ | = _____% |
Did you get this?
A large difference between the results for the two years; 2001's performance was just less than half of 2000's result. We are assessing the efficiency of fixed assets and 25% is probably respectable. However, 11% is another matter and suggests a major change in efficiency between the two years.
Let's look at some other figures from the accounts that should help to explain what has happened to make this ratio fall so dramatically. The cost of sales has increased by 64% over the year and operating costs have increased by 37%; turnover has increased by 59% over the year
The Carphone Warehouse Consolidated Profit and Loss Account | 31 March 2001 | 25 March 2000 |
---|---|---|
£'000 | £'000 | |
Turnover | 1,110,678 | 697,720 |
Cost of sales | -830,126 | -505,738 |
Gross profit | 280,552 | 191,982 |
Operating expenses | -176,960 | -129,359 |
Operating profit | 66,016 | 41,389 |
Other costs/income | -21,004 | -16,089 |
Profit before interest and taxation | 45,012 | 25,300 |
Source:
http://www.bized.co.uk/
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