Leader

Outline solutions to session 3 exercises

1.




| |P |L |C |
|Sales |£200,000 |£120,000 |£180,000 |
|Profit before interest |£12,000 |£7,200 |£5,400 |
|Capital diligent |£50,000 |£60,000 |£45,000 |
| | | | |
|Return on capital employed |24% |12% |12% |
| operational profit margin |6% |6% |3% |
|Asset turnover |4 times |2 times |4 times |




L and C withdraw to bring their performance up to Ps take L by improving addition management and C by improving profit margins.

2. A Limited and B Limited

Return on capital employed (ROCE)
A is earning a high ROCE, despite a lower operating margin. because A must be achieving a high asset turnover rate. This conclusion is backed up by the high decided asset turnover.
Gross margin
A earns a higher gross margin, and therefore is trading more profitably with customers. They could be charging higher prices to customers, but the earlier payment of creditors may ungenerous that they are being charged lower supply prices.
Operating profit margin
A earns a lower margin, therefore the prefer gained at the gross profit level is lost. A incurs higher overhead payments than B. Rented premises? (they do have lower fixed assets). Staff costs? Advertising costs? (It is possible that A has higher selling prices [note higher gross margin], which need more...If you indirect request to get a full essay, order it on our website: Orderessay



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