Ratios Analysis

 Profitability Ratios

According to Moles (2011) profitability Ratios measure management’s ability to make efficient of the firm’s assets to generate sales and manage the firm’s operation.

Gross Profit Margin


The gross profit margin measures the percentage of net sales remaining after the cost of goods sold is paid, cited by Moles (2011).

Gross Profit Margin  = Net Sales – Cost goods sold / Net Sales

Gross Profit Margin (2010)  = Net Sales  – Cost goods sold / Net Sales

Gross Profit Margin (2010)  = 6.429 – 4.494,4 / 6.429 

Gross Profit Margin (2010) = 30.1%

Gross Profit Margin (2011)  = Net Sales  – Cost goods sold / Net Sales

Gross Profit Margin (2011)  = 6.319 – 4.473.6 / 6.319 

Gross Profit Margin (2011) = 29.2 %

Thus, after paying the cost of goods sold First Group Company plc had for 2010 30.1% and for 2011 29.2% of the sales amount remaining to pay others expenses. This calculation shows that First Group Company’s gross margin has been decreased over the past year.

Operating Profit Margin and EBITDA Margin

According to Moles (2011) operating profit is typically measured as EBIT, the operating profit margin, therefore, gives an indication of the profitability of the firm’s operations, independent of its financing policies or tax management strategies.  

Operating profit margin  = EBIT / Net sales

Operating profit margin  (2010) = 454 / 6.319 

Operating profit margin  (2010) = 7.18%

Operating profit margin  (2011) = 457/ 6.429

Operating profit margin   (2011) = 7.10%

Net Profit Margin

According to Moles (2011) net profit margin indicates the percentage of sales remaining after all of the company’s expenses, including taxes and interest.

Net profit margin = Net income (Profit for the year) / Net sales

Net profit margin (2010)  = 132 / 6.319

Net profit margin (2010)  = 2.1%

Net profit margin (2011)  = 103/ 6.429

Net profit margin (2011)  = 1.6 %

 Source: 4 Traders (2012)

 Source: 4 Traders (2012)

 Source: 4 Traders (2012)

BIBLIOGRAPHY

Books:

• Moles, P. (2011) “ Corporate Finance”.  First Edition. John Wiley and Sons Ltd. England.

Website:

• 4 Traders (2012) "First Group plc" [online] Available at: http://www.4-traders.com/FIRSTGROUP-PLC-4001947/financials/(Accessed 05/05/2012).