Evaluating Business Performance

Running head: EVALUATING BUSINESS PERFORMANCE
Evaluating Business Performance
Name of the Student
Name of the University
Author Note

EVALUATING BUSINESS PERFORMANCE1
Table of Contents
Assessment Task 2 – Case Study.....................................................................................................2
Part 1............................................................................................................................................2
Part 2............................................................................................................................................8
Part 3............................................................................................................................................9
Assessment Task 4 – Written Activities........................................................................................11
Written Activity 1......................................................................................................................11
Written Activity 2......................................................................................................................15
Written Activity 3......................................................................................................................19
References..................................................................................................................................22

EVALUATING BUSINESS PERFORMANCE2
Assessment Task 2 – Case Study
Part 1
1. Computation of Ratios
a. Gross Profit ratio
Particula
rs
Formula X1 X2 X3
Sales 520000 700000 950000
Gross
Profit
310000 395000 530000
Gross
Profit
Ratio
Gross Profit/Sales
*100
59.6153
8
56.4285
7
55.7894
7
b. Net Profit ratio
Particulars Formula X1 X2 X3
Sales 520000 700000 950000
Net Profit 114286 142857 171429
Net Profit Ratio Net Profit/ Sales *100 21.97808 20.40814 18.04516
c. Liquid Ratio
Particulars Formula X1 X2 X3

EVALUATING BUSINESS PERFORMANCE3
Current Assets 380000 440000 488000
Current
Liabilities
100000 120000 130000
Liquid Ratio Current Assets/Current
Liabilities
3.8 3.666667 3.753846
d. Accounts Receivable Rate
Particulars Formula X1 X2 X3
Net Credit Sales 364000 490000 665000
Average Accounts
Receivable
30000 45000 48000
Accounts receivable
rate
Net Credit Sales/Average Accounts
Receivable
12.133
33
10.888
89
13.854
17
e. Inventory Turnover
Particulars Formula X1 X2 X3
Opening Stock 40000 50000 60000
Closing Stock 50000 60000 70000
Average Inventory (Opening Inventory + Closing
Inventory)/2
45000 55000 65000

EVALUATING BUSINESS PERFORMANCE4
Cost of Goods sold 210000 305000 420000
Inventory Turnover Cost of Goods Sold / Average
Inventory
4.6666
67
5.5454
55
6.4615
38
f. Return on Equity
Particulars Formula X1 X2 X3
Net Profit 114286 142857 171429
Equity Share Capital 520000 560000 620000
Return on Equity Net Profit/Shareholder's Equity 0.2197
81
0.2551
02
0.2764
98
g. Debt to Equity
Total Debt 50000
0
500000 500000
Total Equity 50000
0
560000 620000
Debt to Equity Total Debt/Total Equity 1 0.89285
7
0.80645
2
h. Total asset turnover
Particulars Formula X1 X2 X3

EVALUATING BUSINESS PERFORMANCE5
Net Profit 114286 142857 171429
Total Assets 110000
0
122000
0
130000
0
Total Asset Turnover Net Profit/Total Assets 0.1038
96
0.1170
96
0.1318
68
i. Return on Investment
Net Profit 114286 142857 171429
Total Investment 100000
0
106000
0
112000
0
Return on Investment Net Profit/Total Investment *100 11.428
6
13.4770
8
15.3061
6
j. Economic Value Added
Particulars Formula X1 X2 X3
NOPAT 80000 100000 120000
Invested Capital 100000
0
106000
0
112000
0
WACC 0.08 0.08 0.08
EVA NOPAT-(Invested capital*WACC) 0 15200 30400
k. Residual Income