Scribd
Upload
5 views4 pages

COGS Solution Accounting

In 2019, the cost of goods sold was 11.33% of revenues, while gross profit increased to 29.24%. The current ratio improved to 3.00, indicating potential inefficiency in asset management, and the receivables turnover decreased to 0.876, suggesting challenges in collecting debts. Overall, the company showed growth in net profit margin and gross profit, but faced issues with asset utilization and receivables management.

Uploaded by

Kazi Fahim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
5 views4 pages

COGS Solution Accounting

In 2019, the cost of goods sold was 11.33% of revenues, while gross profit increased to 29.24%. The current ratio improved to 3.00, indicating potential inefficiency in asset management, and the receivables turnover decreased to 0.876, suggesting challenges in collecting debts. Overall, the company showed growth in net profit margin and gross profit, but faced issues with asset utilization and receivables management.

Uploaded by

Kazi Fahim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

The cost of goods sold was 11.33% of the revenues earned in 2019 and 8.38% in 2018.

The cost of power generation increased in 2019. It was 59.43% of the revenues earned in 2019 and
68.82% in 2018. The gross profit also increased in 2019. The gross profit was 29.24% in 2019 and
22.84% in 2018. All the expenses (Operating expenses, General and Administrative expenses and selling
and distribution expenses) increased in 2019. The net profit was 11.97% of the revenues in 2019 and
9.26% in 2018. This was the income statement part.

Coming to the Balance sheet we can see that, 60.39% of the total assets was Non-Current Assets and
39.61% was Current assets. We can say that the company did not keep their assets idle but did long
term investments for the betterment of the company. Now the same thing had happened in 2018, the
current assets was 40.05% of the total assets, and Non-current Assets was 59.95%.
1. Current Ratio: The current ratio compares all of a company’s current assets to its current
liabilities. These are usually defined as assets that are cash or will be turned into cash in a year
or less, and liabilities that will be paid in a year or less.

Current Ratio=Current liabilities/Current assets

A current ratio that is in line with the industry average or slightly higher is generally considered
acceptable. A current ratio that is lower than the industry average may indicate a higher risk of distress
or default. Similarly, if a company has a very high current ratio compared to their peer group, it indicates
that management may not be using their assets efficiently.

For Orion Pharma, the current ratio was 3.00in 2019 and 2.23 in 2018. This means that the company can
cover liabilities 3 times, it indicated that the current assets are not being used properly and is not
securing financing very well and also not managing its working capital.

2. Acid test Ratio: An acid-test ratio, also known as a quick ratio, is a financial measure of a
company’s ability to pay off its current liabilities – that is, any debt that will need to be repaid
within a year, such as credit card charges and accounts payable. The acid-test indicates whether
a business can pay off such debt immediately using cash or current assets. It’s one measure of a
company’s short-term financial health.

Acid-test ratio = (cash + accounts receivables + short-term investments)/current liabilities

Acid-test ratios less than 1 may mean the company does not currently have sufficient current assets to
cover its current liabilities.

3. Receivable Turnover: The receivables turnover ratio is an accounting measure used to


quantify a company's effectiveness in collecting its receivables or money owed by clients. The
ratio shows how well a company uses and manages the credit it extends to customers and how
quickly that short-term debt is collected or is paid. The receivables turnover ratio is also called
the accounts receivable turnover ratio. The receivables turnover ratio measures the efficiency
with which a company collects on their receivables or the credit it had extended to its
customers. The ratio also measures how many times a company's receivables are converted to
cash in a period. A high receivables turnover ratio can indicate that a company’s collection of
accounts receivable is efficient and that the company has a high proportion of quality customers
that pay their debts quickly. A high receivables turnover ratio might also indicate that a
company operates on a cash basis.
A high ratio can also suggest that a company is conservative when it comes to extending credit to its
customers. Conservative credit policy can be beneficial since it could help the company avoid extending
credit to customers who may not be able to pay on time. In 2019 the turnover was 0.876 and in 2018
the turnover was 1.185. This means that company isn’t able to collect its receivables efficiently.

4. Inventory Turnover: Inventory turnover is a ratio showing how many times a company has sold
and replaced inventory during a given period. A company can then divide the days in the period
by the inventory turnover formula to calculate the days it takes to sell the inventory on hand.
Calculating inventory turnover can help businesses make better decisions on pricing,
manufacturing, marketing and purchasing new inventory. In 2019 it was 5.84 and in 2018 it
was 7.29, which means that it takes 5.84 days and 7.29 days to sell the inventory.
5. Profit Margin: The profit margin is a ratio of a company's profit (sales minus all expenses)
divided by its revenue. The profit margin ratio compares profit to sales and tells you how well
the company is handling its finances overall. The net profit margin tells you the profit that can
be gained from total sales. In 2019 the profit margin is 0.101 and in 2018 it is 0.0765 which
means that for 1 taka sales, the profit is 0.101 taka and taka 0.0765.
6. Assets Turnover: The asset turnover ratio measures the efficiency of a company's assets to
generate revenue or sales. It compares the dollar amount of sales or revenues to its total assets.
The asset turnover ratio calculates the net sales as a percentage of its total assets.

Generally, a higher ratio is favored because there is an implication that the company is efficient in
generating sales or revenues. A lower ratio illustrates that a company is not using the assets efficiently
and has internal problems.

7. Return on Assets: Return on assets (ROA) is an indicator of how profitable a company is relative
to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate earnings. Return on assets is displayed
as a percentage. Return on Assets (ROA) is an indicator of how well a company utilizes its
assets, by determining how profitable a company is relative to its total assets.

8. Return on Equity: Return on equity (ROE) is a measure of financial performance calculated by


dividing net income by shareholders' equity. Because shareholders' equity is equal to a
company’s assets minus its debt, ROE is considered the return on net assets. ROE is considered a
measure of how effectively management is using a company’s assets to create profits.
9. Pay out ratio: The payout ratio is a financial metric showing the proportion of earnings a
company pays shareholders in the form of dividends, expressed as a percentage of the
company's total earnings. On some occasions, the payout ratio refers to the dividends paid out
as a percentage of a company's cash flow. The payout ratio is also known as the dividend payout
ratio. The payout ratio is a key financial metric used to determine the sustainability of a
company’s dividend payment program. It is the amount of dividends paid to shareholders
relative to the total net income of a company.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy