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    Business Hw

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    Business Hw

    Uploaded by

    azpirimunoz
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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    0 views2 pages

    Business Hw

    Uploaded by

    azpirimunoz

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 2

    Analysis and Assignment: Sunny Snacks Ltd.

    Income Statement Preparation

    Income Statement for Sunny Snacks Ltd.

    Amount
    Category
    ($)

    Revenue 200,000

    Cost of Sales (120,000)

    Gross Profit 80,000

    Expenses:

    - Rent Expenses (12,000)

    - Salaries and
    (15,000)
    Wages

    - Marketing
    (8,000)
    Expenses

    - Utilities (5,000)

    - Insurance (3,000)

    - Interest on
    (4,000)
    Loans

    Total Expenses (47,000)

    Profit Before Tax 33,000

    Tax (20%) (6,600)

    Profit After Tax 26,400

    Ratio Analysis

    1. Gross Profit Margin

    80,000/200,000 x 100 = 40%

    2. Net Profit Margin

    26,400/200,000 x 100 =13,2%

    3. Return on Capital Employed (ROCE)


    33,000/100,000 x 100 = 33%

    Discussion Questions

    1. Performance Insights from Ratios:


    The gross profit margin of 40% indicates effective cost management
    in producing or sourcing snacks. The net profit margin of 13.2%
    suggests that expenses significantly impact profitability. The ROCE
    of 33% demonstrates efficient use of capital, reflecting good returns
    relative to investment.

    2. Greatest Impact on Profitability:


    Salaries and wages ($15,000) have the highest direct expense after
    cost of sales. Marketing and rent expenses also play substantial
    roles, collectively contributing significantly to the total expense
    burden.

    3. Recommendations to Improve ROCE:

    o Reduce Operating Costs: Focus on optimizing rent, salaries,


    and marketing expenses without compromising essential
    operations.

    o Increase Revenue: Diversify snack offerings or expand into


    new markets to boost sales.

    o Leverage Automation: Introduce technology to reduce manual


    labor costs over time.

    o Refinance Loans: Seek better loan terms to reduce interest


    payments.

    Improving cost efficiency and revenue streams will help enhance the
    company’s profitability and return on capital employed.

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