P2: Carry Out Analysis of the Business Using Comparative Measures of Performance
P2: Carry out an analysis of the business using comparative measures of performance.
One of the keys to success of the World Beat Fitness Center is the ability to offer reasonably priced programs. The club has increased the size of its fitness center and added more equipment that gives full satisfaction to all members. They are exposing everyone to the variety of activities and services the club offers.
Analysis of the business financial statement particularly the assets and liabilities are computed below:
GROSS AND NET PROFIT MARGIN ANALYSIS
Net profit margin is one of the profitability ratios and an important tool for financial analysis. It is the final output any business is looking out for. Net profit ratio is a ratio of net profits after taxes to the net sales of a firm. All the efforts and decision making in the business is to achieve a higher net profit margin with increase in net profits.
Net profit margin shows the margin left for the equity and preference shareholders i.e. the owners. Unlike the gross profit which measures the operating efficiency of the business, net profit margin measures the overall efficiency of the business. An adequate margin of net profits will be generated only when most of all the activities are being done efficiently. The activities may be production, administration, selling, financing, pricing, tax management or inventory management. Even if any of these perform badly, the effect on net profits and their margins can be seen.
Below is the graph that shows the center performance for three years. For the sake of confidentiality, amounts were deleted as shown:
The graph shows an annual increase of World Beat Fitness Center sales, gross margin and net profit from 2009 to 2011. It has a stable increase of approximately 15% every year in sales but 14.29%, 15.53% and 17.55% for year 2009, 2010 and 2011, respectively in gross margin that gives an increasing net profit that ranges from 4% every year.
One of the keys to success of the World Beat Fitness Center is the ability to offer reasonably priced programs. The club has increased the size of its fitness center and added more equipment that gives full satisfaction to all members. They are exposing everyone to the variety of activities and services the club offers.
Analysis of the business financial statement particularly the assets and liabilities are computed below:
GROSS AND NET PROFIT MARGIN ANALYSIS
Net profit margin is one of the profitability ratios and an important tool for financial analysis. It is the final output any business is looking out for. Net profit ratio is a ratio of net profits after taxes to the net sales of a firm. All the efforts and decision making in the business is to achieve a higher net profit margin with increase in net profits.
Net profit margin shows the margin left for the equity and preference shareholders i.e. the owners. Unlike the gross profit which measures the operating efficiency of the business, net profit margin measures the overall efficiency of the business. An adequate margin of net profits will be generated only when most of all the activities are being done efficiently. The activities may be production, administration, selling, financing, pricing, tax management or inventory management. Even if any of these perform badly, the effect on net profits and their margins can be seen.
Below is the graph that shows the center performance for three years. For the sake of confidentiality, amounts were deleted as shown:
The graph shows an annual increase of World Beat Fitness Center sales, gross margin and net profit from 2009 to 2011. It has a stable increase of approximately 15% every year in sales but 14.29%, 15.53% and 17.55% for year 2009, 2010 and 2011, respectively in gross margin that gives an increasing net profit that ranges from 4% every year.