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Krispy Kreme Ratios

In: Business and Management

Submitted By SkyLieAngel
Words 574
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Ratio Analysis: * Profitability * Return on capital employed = OP/Net Asset
Indicates the business earns on its capital. Key question: could the capital be used anywhere else to gain a better return? * Gross profit = gross profit/revenue
Gross profit = revenue – cost of sale
Indicates company direct return * Net profit = net profit before tax/revenue
Profit takes administrative and distribution expenses into account

* Efficiency * Trade receivables collection period (debtor collection period)
Daily basis = avg. trade receivables / credit sales per day * Trade payables collection period
Avg. trade payables *365/sales * Inventory turnover = cost of sales / avg. inventories
Takes how long to sell inventory, measures the efficiency of inventory * Asset turnover=revenue/average total assets
Every year how much revenue generated in terms of total assets. Takes into account of total asset resources utilization If take all ratios into account, we can measure the efficiency of cash cycle. If we hold inventory for xx days (inventory turnover ratio) and then debtors take xx days to pay (trade receivables collection period). Thus all in all it takes us xx days to receive our money while we pay suppliers in xx days (trade payable) some business can manage to receive their cash from customers before they pay them.

* Liquidity * Current ratio = current assets / current liabilities
Measures weather the short-term assets cover the shot-term liabilities. If they do not, then there will be insufficient liquid funds to pay current liabilities as they fall due. * Quick ratio / Acid Test
= (Current assets – inventories)/current liabilities
Measures the extreme short-term liquidity. Basically inventories are sold, turning into trade receivable. When the debtors pay, the business gain cash. The

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