Testing your understanding - 7
Adam and Sonny both start up business at the same time, but they were completely independent of each other and operated in different towns.  At the end of the first year their income statements were:
                           Adam  Sonny
                              £          £
 Sales                10,000  5,000
 Cost of Sales     5,000  2,000

 Gross Profit      5,000  3,000
 Overheads       3,000  1,000

 Net Profit         2,000  2,000

Their find final position statements showed that they had both employed capital of £5,000.   Which was the more efficient business man?

 take a peep at the answer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

  answers to testing your understanding - 7
                                                     ADAM     SONNY

[GROSS PROFIT RATIO]

                                                5,000 x 100     3,000 x 100 
                                                      10,000             5,000

                                                        50%       60%

[NET PROFIT RATIO]

                                                 2,000 x 100     2,000 x100
                                                       10,000           5,000
                                                          20%            40%

[R.O.C.E.]

                                                   2,000 x 100     2,000 x 100
                                                          5,000           5,000
                                                             40%       40%
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