ANALYSING
FINANCIAL PERFORMANCE
Analysing financial performance and comparing it with previous
performance can help identify weaknesses in an organisation's
performance and suggest solutions. Generally this is done by
calculating what are called 'ratios' in three key areas: profitability,
efficiency and finance. In each case, you are aiming for a higher
figure each year.
Profitability Ratios
Gross profit
Gross margin
=
x
100
Sales
Net profit before tax
Net profit margin
=
x
100
Sales
Net profit before tax
Return on net assets
=
x
100
Assets - current liabilities
Efficiency Ratios
Sales
Net asset turnover
=
Net assets
Sales
Stock
x
365
Stock turnover
or
=
Stock
Sales
P 224