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Profit Margin - Discussion 2, accounting homework help
Respond to each of the discussion posts separately listed below by telling what changes you would recommend to improve the net margin of the company based off of the below information. (250 words minimum)
Year Ending December 2012Year Ending December 2011Year Ending December 2010Revenues40,00035,00033,000Operating ExpensesSalaries15,00010,0009,000Maintenance & Repairs6,0009,00010,000Rental Expense2,5002,5002,500Depreciation2,0002,0002,000Fuel4,0003,5002,500Total Operating
Expenses29,50027,00026,000Operating Income10,5008,0007,000Sales & Administrative
Expenses6,0004,0003,000Interest Expense2,5002,0001,000Net Income2,0002,0003,000Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012. Calculate the net-profit margin for each of these years. Comment on the profit margin trend.
Discussion Post 1: Profit Margin (MK)
Calculate the net-profit margin for each of these years. Comment on the profit margin trend.
First, let’s calculate the net profit margin. This is done by utilizing the net profit margin ratio:
“Net Profit Margin = Net Income / Net Sales” (Wainwright, 2012)
Using this ratio, we come up with the following results:
2010: 3000 / 33000= 9.0% net profit margin
2011: 2000 / 35000 = 5.7% net profit margin
2012: 2000 / 40000 = 5.0% net profit margin
After calculating the net profit margin, it can be concluded that the trend is that Cecil’s profit margin is continuously shrinking. There are many factors that could affect this i.e. depreciation of value each year.
Discussion Post 2: Profit Margin (CW)
Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.
Profit Margin= Net Income/ Profit Sales
3,000/33,000 = 9.09%
2,000/35,000 = 5.71%
2,000/40,000 = 5.00%
Salaries increased each year and based on the data its looks like Cecil, Inc has done a decent job of managing their expenses for the years indicated. The company has however seen a significant increase in salaries as well as administrative expenses over the years. I think they need to better monitor these cost due to their increases over the years and the effects on the operations of the organization as whole. Sales and administration cost doubled and salaries increased by $6000.
Discussion 1: Profit Margins