Page 259 - Microsoft Word - 00 IWB ACCA F7.docx

Interpretation of financial statements

Profitability

1.1 Gross profit margin: calculation

Gross profit
—————— × 100%

Revenue

1.2 Gross profit margin: reasons for movement

 selling prices

 sales mix

 purchase cost

 production cost

1.3 Operating profit margin: calculation

Profit from operations

————————— × 100%
Revenue

1.4 Operating profit margin: reasons for movement

 gross profit

 expenses: administration/distribution

1.5 Asset turnover: calculation

Revenue
—————————

Capital employed

1.6 Asset turnover: reasons for movement

 increase/decrease in revenue

 increase/decrease in non-current assets

 increase/decrease in working capital

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