Hi Guys. I'm confused. This is a question on ratio analysis. We have a company for which we are given financial figures, and asked to analyse it. In order to do so, I want to find the profit before tax and interest. In this case, I caluculate it to be Sales - Purchases - (Closing Stock - Opening Stock) - expenses. Does this sound sensible? This throws up that Evolution PLC (our company) made some 21,000 in the first year, but posted a 114,000 loss in the second. Upon reading the answer however, I was surpised to note the profit margins had increased!!! Help! What am I doing wrong??? Thanks, Simon
I think you need to add (Closing stock - Opening stock) as opposed to subtract it. The calculation is Sales - Cost of sales - Expenses. Cost of sales is equal to Purchases - Increase in stock + Depreciation + Wages of Manufacturing staff. So you subtracting a negative number, which means you are adding it! Hope this helps!
Oops - I think you are right... silly error , looking good for thurs! Will have another look. Thanks!
