Table 1
Profitability Ratios
RATIO FORMULAS Y2011 Y2012 Y2013
Gross Profit Margin (%) (Gross profit / Sale) * 100 5,50% 5,43% 5,48%
Return on Capital Employed (%) (PBIT/ Capital Employed) * 100 11,10% 11,10% 11,20%
Net Profit Margin (%) (Net income / Sales) * 100 3,03% 2,68% 2,63%
Return On Equity (%) (Net Income / Equity) * 100 11,79% 10,62% 10,70%
Gross Profit Margin
The gross profit margin indicates the income of the company after calculating the cost earned by the firm in generating goods and services (Dyson, 2010).
A company with a higher gross profit margin than its competitors, or the industry average, is considered to be more efficient and consequently preferred than the others. (Paramasivan, 2009) Referring to the above chart of gross profit margin it can be valued that there wasn’t a major change among three years. In 2011 Sainsbury had the higher percentage of…show more content… It can be assumed that in 2012 and 2013 took longer for the company to sell its goods or there were an increased number of inventories that took more time to sell.
Asset Turnover
The asset turnover ratio indicates a company’s capability of using its assets in order to generate sales or revenue. According to McLaney and Atrill, (2012) higher the asset turnover ratio, the better it is because allows the company to generate more revenue per pound of asset. In this case Sainsbury asset turnover in 2011 was 1,85 times in 2012 decreased by 0,04 and in 2013 increased again to 1,84 times.
Gearing ratios
Gearing ratios allow potential investors to inspect the financial condition of a company through its capital structure. Gearing ratios allow a potential investor to make comparisons of a company’s equity comparative with the appropriate assets, (Atrill and Mclaney 2012).
Table 4
Gearing Ratios
RATIO FORMULAS Y2011 Y2012