Financial Ratio Analysis

Appendix | | | | | |

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Profitability Ratio | | | | | |

1. Gross Profit Margin | = | (Revenue - COGS) / Revenue | |

| | = | (683,200 - 433,600)/683,200 | |

| | = | 0.3653 or 36.53% | | |

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2. Net Profit Margin | = | Net Profit / Revenue | |

| | = | 27,350/683,200 | | |

| | = | 0.04 or 4% | | |

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3. Return on Assets (ROA) | = | Net Profit / Total Assets | |

| | = | 27,350/2,711,650 | | |

| | = | 0.0101 or 1.01% | | |

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4. Return on Equity (ROE) | = | Net Profit / Stockholder's Equity |

| | = | 27,350/1,200,000 | | |

| | = | 0.0228 or 2.28% | | |

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Financial Stability Ratios | | | | |

5. Debt Ratio | = | Total Liabilities / Total Assets | |

| | = | 1,484,300 / 2,711,650 | |

| | = | 0.5474 or 54.74% | | |

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6. Debt to Equity Ratio | = | Total Liabilities / Shareholder's Equity |

| | = | 1,484,300 / 1,200,000 | |

| | = | 1.24 or 123.69% | | |

RE : Profitability and Financial Stability Analysis

The profitability analysis consists of gross profit margin, net profit margin, return on assets (ROA) and return on equity (ROE). This analysis is to provide an insight the ability of the business to generate income and what is the exact figure of the income. The profitability analysis gives important information whether to invest an investment. However, the financial stability analysis consists of debt ratio and debt to equity ratio. Financial analysis is done to analyst a company’s current financial stability and performance. Future condition and performance may be predicted as well.

The gross profit margin is to measures profitability. Higher values indicate that more cents are earned per dollar of revenue which is favourable. Our company is having a 36.53% of gross profit margin. As compare to jewelry industry, an average of gross profit...