Semester 1 Business Accounting Assignment: BT Group Case Study

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Business Accounting
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Contents
Set 5.................................................................................................................................................3
Set 7.................................................................................................................................................4
Set 8.................................................................................................................................................5
1.a)...............................................................................................................................................5
b)..................................................................................................................................................5
References........................................................................................................................................6
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Set 5
Table showing Gross Margin
Particulars 2016 2017 2018
Operating profit £ 3,950 £ 4,135 £ 3,991
Sales £ 18,909 £ 24,082 £ 23,746
Gross Margin 20.89% 17.17% 16.81%
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0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2016
2017
2018
Gross Margin Ratio
The gross margin is computed by dividing operating profits or gross profits with net sales or
revenue. The formula for gross Margin is shown below:
Gross Margin = Operating Profits or Gross Profits/ Net Revenue
The gross margin shows the sales income remains after the direct cost that is incurred in the
production process. The gross margin is good for the organizations and in BT Group plc it can be
seen that profit margin is showing a decreasing trend from the years 2016 to 2018. It can be seen
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that the gross profit margin of the company was 20.89% in the year 2016 but it has reduced to
16.81% in the year 2018 which is a negative sign for the company (BT Group Plc, 2019). The
gross profit margin shows that the sales can cover the operating expenses of the company or not.
Higher the gross profit margin better it will be for the company. It is recommended that BT
Group Plc. We should take certain measures to improve the gross profit margin as the same is
showing a downward trend.
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Set 7
Earnings per Share
201
6 2017 2018
Earnings per share 30% 19.20% 20.50%
1
0%
5%
10%
15%
20%
25%
30%
35%
2016
2017
2018
Earning Per Share
EPS is a measure of finance which helps in measuring the profitability of the company. The EPS
of BT Group plc has no constant trend, in 2017 the EPS is 19.20% which is less than from the
year 2016 and then in 2018 the earning per share again increases.
An ordinary share is also known as a common share. These shares represent the general voting of
shares of a corporation. The holder of ordinary shares gets the dividend (BT Group Plc, 2019).
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Set 8
1.a)
Debt is that money which is borrowed by the company and the company has to repay the amount
borrowed to the lender with the interest amount. Debt can for the short-term and the long-term.
Short term debts are the current liabilities of the company. The obligation to pay off the amount
will be for one year or less than it. In the balance sheet of a company the current liabilities comes
under the head of total liabilities. Examples of this type of debt are account payables, short term
loans, etc (Diamond, and He, 2014).
Long-term debt is debt for more than one year. These are also known as the long-term liabilities
which come under total liabilities in the balance sheet. Examples of long-term debt are bonds,
convertible bonds, contingent obligations, etc.
b)
Types of debt
1. Secured debt: this debt is given against collateral security. When the person is failed to
make the payment to the lender, the lender has the right to forfeit that security.
2. Unsecured debt: No collateral security is given against this debt.
3. Revolving debt: This debt is an agreement between the lender and the consumer.
4. Mortgage: These loans are taken for the purchase of fixed assets (Diamond, and He,
2014).
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References
o Diamond, D.W. and He, Z., 2014. A theory of debt maturity: the long and short of debt
overhang. The Journal of Finance, 69(2), pp.719-762.
o BT Group Plc, 2019. [online] Annual Report. BT Group Plc. Available at:
https://www.btplc.com/Sharesandperformance/Annualreportandreview/2018summary/
documents/annual_report_2018.pdf [Accessed 30 Jul. 2019].
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