Summary of Findings on Gross Margin, Profit Margin After Tax, Earnings Per Share, Times Interest Earned and Return on Stakeholder Capital for Example Corporation

This presentation provides a summary of findings on gross margin, profit margin after tax, earnings per share, times interest earned and return on stakeholder capital for Example Corporation. The company has reported an improved gross margin of 24% in 2017, higher than the industry standard of 22%. The net profit margin of 5% is also higher than the industry standard of 3.7%. However, the times interest earned ratio of 2.33 is lower than the industry standard of 3.0, indicating potential difficulty in covering interest expenditure. The return on stakeholder capital of 8% is higher than the industry standard of 6%, indicating successful generation of profits from stakeholder equity. Recommendations include improving profits through margin expansion and increasing net operating income while reducing operating expenditure.

Assessment 3 – Task 3.4

SUMMARY OF FINDINGS – GROSS MARGIN
• The company has reported the gross margin of 24% in the financial
year of 2017 which is an improvement over the gross margin reported
in 2016 and industry standard of 22%.
• The company is using its material and labour to produce the and sell
products at profit. In spite of the cost of goods sold has increased over
the years but the company has improved its sales revenue significantly.
• The gross profit of Example Corporation would provide the investors
with the confidence and key insight of its actual financial health.

Summary of Findings - Profit
Margin After Tax:
– The ratio shows that the company has reported a net profit margin of 5% for
the financial year ended 2017 while the net profit margin for the industry
standards stands 3.7%.
– This implies that the company has reported the net profit greater than the
industry standards.
– A higher margin of profit margin after tax for Example Corporation shows that
the company has been successful in translating the sales into the profits at the
end of financial year.

SUMMARY OF FINDINGS-
EARNINGS PER SHARE:
• The company during the year 2017 reported the earnings per share of 0.23
based on its common outstanding shares.
• The earnings per share for the industry standard stands 0.24 which is
marginally higher than the values reported by Example Corporation.
• Although a higher earnings per share is held as better than the lower
earnings per share because it implies that the company is generating more
amount of profit and the company has more amount of profit to distribute
for its shareholders.

Summary of Findings – Times Interest
Earned
 The Example Corporation reports the Times Interest Earned ratio of 2.33
during the year 2017 while the average industry standard stands 3.0.
 The computation evidently provides that the company has reported
lower times interest ratio than the industry standard and may face
difficulty in future in covering its interest expenditure.
 The company presently does not seem to having the enough income
and may face the difficulty in the long run to meet its interest expense
obligation.

Summary of Findings - Return on
Stakeholder Capital
• The return on stakeholder capital for the company stands 8%
for the financial year of 2017 while the industry standards for
this ratio stands 6%.
• The ratio evidently provides that Example Corporation has
been successful in generating profits from every dollar of its
common stakeholder’s equity.
• The return on stakeholder capital effectively of Example
Corporation also represents that the company is using the
capital of the stakeholders for funding its operations and
overall growth of the company as well.

Recommendations
 It is recommended for Example Corporation to improve its profits is
with the help of lowering its cost as the percentage of revenue. This is
known as margin expansion and this can successfully contribute to
increase in its earnings per share than the present industry standards.
 The company is recommended to increase its net operating income
and reduce its operating expenditure as this will help in increasing its
revenue. Cutting the unnecessary expenses and finding ways of
streamlining the process will help in improving the interest coverage
ratio.

Thank You