3] Present a Vertical Analysis of ABC Ltd based on the following figures, also interpret the result.
3] Present a Vertical Analysis of ABC Ltd based on the following figures, also interpret the result.
| P&L extract for the year ended 31st March, 2017 | |
| Particulars | Amount |
| Sales
Less : Cost of Goods Sold Material Wages Factory Overheads |
1500000
70000 50000 10000 |
| Gross Profit
Less : Selling & Distribution overheads Administrative Overheads |
1370000
20000 15000 |
| Earnings before Interest and Tax
Less: Interest |
1335000
35000 |
| Earnings before Tax
Less: Tax |
1300000
50000 |
| Net Profit | 1200000 |
| Capital Employed | 12000000 |
- Presentation of Vertical Analysis
- Interpretation of the result
Solution : Common-size Statement for the year ended 31st Mar 2017
| Particulars | Rs. (000) | % |
| Sales | 1500000 | 100 |
| Less: Cost of goods sold | ||
| Materials | 70000 | 4.76 |
| Wages | 50000 | 3.33 |
| Factory OHs | 10000 | 0.76 |
| Gross profit | 1370000 | 91.3 |
| Less: Selling and distribution OHs | 20000 | 1.33 |
| Less: Administration OHs | 15000 | 1.00
|
| Earning Before Interest and Tax | 1335000 | 89.0 |
| Less: Interest | 35000 | 2.33 |
| Earning Before Tax | 1300000 | 86.66 |
| Less: Tax | 50000 | 3.33 |
| Net Profit | 1200000 | 80.0 |
| Capital Employed | 12000000 | |
| Net Profit as % of Capital Employed | 10.41 |
Analytical insights:
- Wages are 3.33% of the sales. There could be room for process engineering or improving labour efficiency.
- Admin costs account for 1% but selling costs 1.33%. This needs more analysis.
The business generates 10.41% profit on invested capital, which may be inadequate
for solution contact us :
SMU MBA fall-2017
Dear Students,
SMU MBA fall-2017 Assignments are available. For Booking ,Kindly mail us on kvsude@gmail.com OR call us to +91 9995105420 or S M S your “ Email ID ” us in the following Format “ On +91 9995105420 we will reach back you with in 24H ”
