Profitability - numerical questions

Question 1

Examine the data below, which is extracted from the accounts of Rattlebone Automobiles over a number of years.

Year 2005 2006 2007 2008 2009 2010
(Units \$k)
Sales 12,000 13,000 12,000 10,000 12,000 15,000
Gross profit 5,000 5,000 6,000 4,000 5,000 8,000
Net (trading) profit 2,000 2,500 1,500 (1,000) 1,000 2,500
Net capital employed 22,000 23,500 25,000 25,000 24,000 26,000

Calculate the profitability ratios for each of these years.

Question 2

You have obtained the profitability figures for two other firms in the car business, and these are given below. The firms are Ocelot plc, a manufacturer of hand-made luxury sports cars, and Bridge plc, a mass producer of small family cars. Comment on your findings, and on the comparisons you can make.

At least all the data relates to the same industry, the car industry. Comparisons should be valid, therefore.

Year 2007 2008 2009 2010
Ocelot plc
ROCE 8% 8% 7.5% 4%
Gross profit margin 55% 60% 50% 50%
Net profit margin 22% 16% (5%) 12%
Bridge plc
ROCE 11% 11% 9% 10%
Gross profit margin 30% 34% 22% 30%
Net profit margin 8% 7% 5% 8%
Interest rate 5% 7% 10% 6%

Question 3

Jeremy Waite runs a small antiques shop. He is a sole trader and views the shop as a 'hobby more than a job'. He is curious about the financial performance of the shop and has provided extracts from two years' final accounts. He would like you to analyse the accounts to assess the profitability of the firm. The sales and balance sheet extracts are as follows:

2010 2011
\$ \$
Sales 16,544 14,870
Cost of goods sold 9,536 8,390
Gross profit 7,008 6,480
Overheads 3,119 4,890
Net profit 3,889 1,590
Capital employed 59,490 57,980

Required

(a) Calculate for both years the following ratios:

(i) Return on capital employed
(ii) Gross profit percentage
(iii) Net profit percentage

(b) Using your results from (a), analyse the profitability of the shop.