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Interpreting accounting information for sole
proprietorsAS90980
Contents1. Analyse Profitability2. Interpret Profitability3. Analyse Liquidity4. Interpret Liquidity5. Analyse Stability6. Interpret Stability
This is ALL of them!
You will get this sheet in your exam so no need to remember the formulae
BRING a calculator to class every day.
Contents1. Analyse Profitability2. Interpret Profitability3. Analyse Liquidity4. Interpret Liquidity5. Analyse Stability6. Interpret Stability
Click here first
Mark-up percentageWHAT is it?How much does a business add on to the cost of goods to get their selling price?
How do we calculate it?
Gross Profit x 100Cost of Goods Sold 1
Remember, its Gross Profit divided by Cost of Goods Sold
1001
times
Remember, its Gross Profit divided by Cost of Goods Sold
1001
times2400096000
1001
times2400096000
0.25 times100
1times
equals25%This means that the business works out 25% of the cost of the goods and adds that on to work out a selling price.
2004 2005 2006Sales 225,000 250,000 280,000Cost of Goods Sold
135,000 150,000 175,000
Gross profit
90,000 100,000 105,000
Financial Information for Kids R Us daycare
The mark-up percentage for 2005 is:a.25%b.75%c.67%d.100%
Well done! You have learned how to calculate the Mark-up percent.
Later we will learn about how this helps us to understand more about a business.
MOVE on NOW to Gross Profit percent.
Correct mark-up percent
Gross profit percentage
WHAT is it?What portion of each $1 of sales does a business receive as gross profit?
How do we calculate it?
Sales
Gross Profit 1001
times
Remember, its Gross Profit divided by Sales this time.
1001
times
Remember, its Gross Profit divided by Cost of Goods Sold
1001
times24000120000
1001
times24000120000
0.20 times100
1times
equals20%This means that the business keeps 20 cents out of every dollar of sales as gross profit. Remember that expenses then come out of that 20 cents.
2004 2005 2006Sales 225,000 250,000 280,000Cost of Goods Sold
135,000 150,000 175,000
Gross profit
90,000 100,000 105,000
Financial Information for Kids R Us daycare
The Gross Profit percentage for 2005 is:a.25%b.40%c.67%d.100%
Well done! You have learned how to calculate the Gross Profit percent.
Later we will learn about how this helps us to understand more about a business.
MOVE on NOW to Expense percent.
Expenses percent• There are 3 you can calculate.
• One for each of the 3 expenses groups (Distribution Costs, Administrative Expenses and Finance Costs).
WHAT is it?How much of each $1 of sales is a business paying on expenses?
How do we calculate it?
Sales
Expense Group 1001
times
Distribution Costs
Sales
66000
398600
100
1times
0.16557 x 100
= 16.56%
Administrative Expenses
Sales
33300
398600
100
1times
0.0835 x 100
= 8.35%
Finance Costs
Sales
2500
398600
100
1times
0.00627 x 100
= .63%
Expenses percent
Expense Group Expense PercentDistribution Costs 16.56%Administrative Expenses
8.35%
Finance Costs 0.63%
Huia Bookstore
16.56 cents in every $1 of sales is spent on Distribution Costs
8.35 cents in every $1 of sales is spent on Administrative Expenses
.63 cents in every $1 of sales is spent on Finance Costs
2004 2005 2006Sales 225,000 250,000 280,00
0Cost of Goods Sold 135,000 150,000 175,00
0Gross profit 90,000 100,000 105,00
0Distribution costs 31,500 40,000 37,800Administrative Expenses 27,000 26,000 28,000Finance costs 9,000 10,000 14,000Profit for the year 22,500 24,000 25,200
Financial Information for Kids R Us daycare
The Finance Cost percentage for 2004 is:a.2.5%b.7.5%c.12%d.4%
Well done! You have learned how to calculate the Gross Profit percent.
Later we will learn about how this helps us to understand more about a business.
MOVE on NOW to Profit Percent.
Recheck the formula and try again.
GO BACK and check the formula
GO BACK and retake the question
GO BACK and see how to work out the answer
Incorrect Mark-up Percent
1001
times100000150000
0.667 times100
1times
equals67%This means that the business works out 67% of the cost of the goods and adds that on to work out a selling price.
Gross Profit
Cost of Goods Sold
Recheck the formula and try again.
GO BACK and check the formula
GO BACK and retake the question
GO BACK and see how to work out the answer
Incorrect Gross Profit Percent
1001
times100000250000
0.40 times100
1times
equals40%This means that the business keeps 40 cents for every dollar of sales made as Gross Profit.
Gross Profit
Sales
Recheck the formula and try again.
GO BACK and check the formula
GO BACK and retake the question
GO BACK and see how to work out the answer
Incorrect Expense Percent
1001
times9000
250000
0.40100
1times equals 40%
Finance Costs
Sales
Sales
Gross Profit