A company has the following summarised income statements for two consecutive years. Although the net profit margin (net profit/sales) is the same for both years at 10%, the gross profit margin is not. Is this good or bad for the business?
【参考答案及解析】
An increased profit margin must be good because this indicates a wider gap between selling price and cost of sales. Given that the net profit ratio has stayed the same in the second year, however, expenses must be rising. In Year 1 expenses were 30% of turnover, whereas in Year 2 they were 35% of turnover. This indicates that administration, selling and distribution expenses or interest costs require tight control. Percentage analysis of profit between year 1 and year 2
An increased profit margin must be good because this indicates a wider gap between selling price and cost of sales. Given that the net profit ratio has stayed the same in the second year, however, expenses must be rising. In Year 1 expenses were 30% of turnover, whereas in Year 2 they were 35% of turnover. This indicates that administration, selling and distribution expenses or interest costs require tight control. Percentage analysis of profit between year 1 and year 2