Financial and Management Accounting

FINANCIAL AND
MANAGEMENT
ACCOUNTING
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Table of Contents
Question:1........................................................................................................................................3
Calculation of gross operating and net profit...............................................................................3
Question: 2 ......................................................................................................................................4
Question:3........................................................................................................................................5
REFERENCES................................................................................................................................7
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Question:1
Calculation of gross operating and net profit
1.Income statement of Stephenson Ltd. for the year ending 2020
Particulars 2019 2020
Sales turnover 1170000 735000
Less: cost of sales -320000 -340000
Gross profit 850000 395000
Less: labour costs 190000 150000
Administration and office costs 100000 105000
Power/heat/light 45000 65000
Operating profit 515000 75000
Less: distribution and delivery 35000 60000
Net profit 480000 15000
2. Ratio Analysis
Net profit ratio
Formula 2019 2020
Net profit / sales turnover *
100
480000 / 1170000 * 100
= 41.03%
15000 / 735000 * 100
= 2.04 %
Significance: It indicates the overall financial health of the business and allows investors to
investigate that whether the business has capabilities to generate enough profits through its sales
revenue and the expenses related to operations are under control or not (Amanda, 2019).
Gross profit ratio
Formula
Gross profit / sales turnover *
100
850000 / 1170000 * 100
= 72.65%
395000 / 735000 * 100
= 53.74%
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