ACCOUNTING AND FINANCIAL MANAGEMENT 3 Essay Example | Topics and Well Written Essays - 2000 words

ACCOUNTING AND FINANCIAL MANAGEMENT 3 - Essay ExampleAlso, ABF Plc. being a low ge ared capital structured company as Woolworth Plc, it would create the similar circumstances for assets exploitations in both companies. This is so as the basic idea of both companies is to protect their equity holders.The performance of Woolworth Ltd. is analyzed on basis of profitability and rate of return ratios. For the purpose of this analysis Gross Profit ratio, Net profit Ratio, Return on Total Assets (ROA), and Return on Equity (ROE) has been selected. Profit Margin ratios show the relation between profit and sales. Since profit can be measured at different stages, there are several measures of profit margin. The most popular are Gross Profit, and Net Profit ratio. The Rate of Return ratios, that are also performance analyzers, reflect the family relationship between profit and investment. The Return on Assets ratio and Return on Equity ratio have used for the purpose so that a gross(a) perfor mance analysis is made fro Woolworth Ltd. These ratios are calculated in attached annexure.The Gross profit ratio for Woolworth Ltd. has been impressive over the years. It has risen from 24.89% in 2005 to 25.03% in 2006 and finally to 25.32% in 2007. The basic reason for such steadily rise is effective use of operational resources by Woolworth Ltd., keeping pace with increasing derangement during this period. The companys revenue is $ 42477.1m in 2007 as compared to 37734.2m and 31352.5m in 2006 and 2005 respectively. Normally it is seen that gross margins go down whenever there is a continuous increase in revenue. But Woolworths has maintained its cost of goods sold completely in control to reflect the increasing gross margins.The success shown by Woolworths in gross margins has been in effect repeated in net margins. The companys net profit ratio was 4.15% in 2005, and that has risen to 4.56% in 2006, and to 4.19%. This is rise is good but the intermission between gross profit a nd net profit is