Gross Margin (Hilda Adelia)

GROSS MARGIN

English for Accounting

By:

Hilda Adelia

36110039

JURUSAN AKUNTANSI

POLITEKNIK NEGERI UJUNG PANDANG

MAKASSAR

2012

GROSS MARGIN PERCENTAGE

A.    FINANCIAL STAMENT ANALYSIS

What is financial statement analysis?

Financial Statement Analysis is one of the financial manager’s task as internal part who is responsible for the company’s financial statement.

B.     SCOPE OF FINANCIAL STAMENT ANALYSIS

Scope of financial statement analysis consist of:

1.      Liquidity Analysis

Liquidity ratios are used to determine a company’s ability to meet its short-term debt obligations. Investors often take a close look at liquidity ratios when performing fundamental analysis on a firm.

2.      Solvency Analysis

Solvency, in finance or business, is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity.^[1] Solvency can also be described as the ability of a corporation to meet its long-term fixed expenses and to accomplish long-term expansion and growth.

3.      Profitability Analysis

Profitability analysis is a component of enterprise resource planning (ERP) that allows administrators to forecast the profitability of a proposal or optimize the profitability of an existing project. Profitability analysis can anticipate sales and profit potential specific to aspects of the market such as customer age groups, geographic regions, or product types.

4.      Cash Flow Analysis

Cash Flow Analysis is a type of financial analysis that compares the timing and amount of cash inflows with the timing and amount of cash outflows. A firm's cash flow position can greatly affect its ability to remain in business. These effects may not be apparent from a cost-benefit analysis.

5.      Bankruptcy Analysis

Bankruptcy is the legal process of liquidating an insolvent debtor’s assets, distributing the proceeds to creditors, and relieving the debtor of any further liability. The bankruptcy process can be initiated by the debtor or by a petition filed by the debtor’s creditors.

6.      Risk Analysis

Bankruptcy is the legal process of liquidating an insolvent debtor’s assets, distributing the proceeds to creditors, and relieving the debtor of any further liability. The bankruptcy process can be initiated by the debtor or by a petition filed by the debtor’s creditors.

7.      Investment Analysis

A budgeting procedure that companies and government agencies use to assess the potential profitability of a long-term investment. Capital investment analysis assesses long-term investments, which might include fixed assets like equipment, machinery or real estate.

C.    PROFITABILITY ANALYSIS

Profitability Analysis consist of:

1.      Gross Margin

2.      Earning Per Share

3.      Price Earning Ratio

4.      Dividend Payout Ratio

5.      Dividend Yield Ratio

6.      Return on Total Assets (ROA)

7.      Return on Common Shareholders’ Equity (ROCE)

D.    GROSS MARGIN PERCENTAGE

Gross margin ratio is the ratio of gross profit of a business to its revenue. It is a profitability ratio measuring what proportion of revenue is converted into gross profit (i.e. revenue less cost of goods sold).

Formula:

Gross margin is calculated as follows:

Gross Margin =	Gross Profit
	Sales

            Gross profit margin shows company’s capability to reach gross profit margin of sale. To count percentage of gross profit margin, we can use formula below:

                 

 

E.     CONSOLIDATED STATEMENT OF INCOME

 

F.      CONCLUSION

Gross margin precentage measures profitability. Higher values indicate that more cents are earned per dollar of revenue which is favorable because more profit will be available to cover non-production costs. But gross margin precentage analysis may mean different things for different kinds of businesses. For example, in case of a large manufacturer, gross margin measures the efficiency of production process. For small retailers it gives an impression of pricing strategy of the business. In this case higher gross margin ratio means that the retailer charges higher markup on goods sold.

According to the count showing in 2008, every sale can reach gross profit margin about 19,71% and in 2009, every sale can reach gross profit margin about 22,81%. So in 2009, PT United Tractors Tbk and branch  get increase of their gross profit margin. According to the income statement, this increase of gross profit  caused by increase of net income about 4,80% and also increase of CGS about 0,74%.  It indicates that in 2009, PT United Tractors Tbk and branch more provide efficiency in operating their production activity so this company gets increase of profitability.