Podcast Beta
Questions and Answers
What does the COGS/Sales ratio indicate about a business?
In which week did the Expenses/Sales ratio first decrease?
What trend is observed for the Net Profit/Sales ratio from Week II to Week IV?
If the Net Profit/Sales ratio is decreasing, which ratio is likely contributing to this decline?
Signup and view all the answers
What was the Net Profit in Week V?
Signup and view all the answers
Based on the trend analysis, what is a potential reason for decreasing profitability?
Signup and view all the answers
Which of the following ratios indicates the proportion of sales consumed by operating expenses?
Signup and view all the answers
What was the COGS/Sales ratio in Week IV?
Signup and view all the answers
What percentage of sales is represented by the cost of goods?
Signup and view all the answers
Which ratio indicates the amount spent on expenses relative to sales?
Signup and view all the answers
What can be inferred about net profit from the given financial ratios?
Signup and view all the answers
Which two companies are noted as sources for industry ratios and norms?
Signup and view all the answers
What is the primary purpose of conducting a competitive analysis?
Signup and view all the answers
What does a trend analysis involve for a business?
Signup and view all the answers
Why are multiple years typically used for trend analysis instead of one week?
Signup and view all the answers
How is sales used to calculate the net profit ratio?
Signup and view all the answers
What is the purpose of using comparisons or ratios in financial analysis?
Signup and view all the answers
Which ratio would you use to assess how efficiently sales cover the Costs of Goods Sold (COGS)?
Signup and view all the answers
What financial indicator does a consistent Net Profit to Sales ratio suggest?
Signup and view all the answers
In the lemonade stand scenario provided, which week showed the highest Net Profit?
Signup and view all the answers
What is the primary reason for fluctuations in sales numbers over different weeks?
Signup and view all the answers
If the Cost of Goods Sold for Week V is $30 and sales are $50, what is the COGS to Sales ratio?
Signup and view all the answers
Why might increased Costs of Goods and Expenses be acceptable when starting a new production line?
Signup and view all the answers
When comparing financial performance, which metric would be least helpful?
Signup and view all the answers
Study Notes
Ratios
- Cost of Goods Sold is 60% of Sales
- Expenses are 16% of Sales
- Net Profit is 24% of Sales
Comparing Performance
- Compare to Competitors, use resources like Dunn & Bradstreet and Robert Morris & Associates
- Compare to Past Performance using Trend Analysis
- Trend Analysis looks at several periods of time to spot trends and patterns and make informed decisions
Lemonade Stand Example
- Week 3 had no expenses, so it was excluded
- The raw numbers fluctuate which makes it difficult to analyze the profitability
- Using ratios helps to stabilize the data and understand the true trends.
- Week 5's Sales, Costs of Goods Sold, Expenses and Net Profit are given
Trend Analysis Table:
- Shows sales, Costs of Goods Sold, Expenses and Net Profit for each week
- Also shows the ratios for Cost of Goods Sold, Expenses and Net Profit over Sales
Trend Analysis Questions:
- Were there profits for the period?
- How is the Net Profit/Sales ratio trending?
- If the Net Profit/Sales ratio is going down, is it because of increase in Costs of Goods Sold, increase in Expenses, or both?
- What happened in the business to cause the problem?
- How would you resolve the problem?
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Explore key financial ratios such as Cost of Goods Sold, Expenses, and Net Profit through the use of trend analysis. This quiz will guide you in comparing a business's performance against competitors and its past. Understand how to interpret data over time for better decision-making.
