Vassie communications have seen a rise since last year in their gross profit margin. Vassie Communications ratio was higher than their competitors as they had 75% as compared to their competitor who had 70% in the year 2015. In 2016, Vassie communications had a gross profit of 106000 and a revenue of 125000 which resulted with a gross profit margin of 84.8%. Vassie has been doing better than their competitors in both 2015 and 2016.
. The net profit for Vassie communications for 2015 was 56% whilst their competitor’s net profit margin was higher at 64%. This suggests that Vassie communications will need to reduce its expenses. The gap between gross profit margin and net profit margin should be as small as possible. One reason for this might be the amount of money spent on staff wages as a percentage of sales. In order for Vassie Communications to keep their expenditures low, they will need to keep a close eye on this ratio and see if it increases again next year and act if it does, either by reducing part time staff hours or not giving part time staff a pay rise, unless of course, sales rise by a bigger amount. In 2016, Vassie’s net profit grew to 73.58% with a net profit of £91975 and a revenue of £125000 which was higher that what they had for 1025 and was also, better than their competitors. In order for Vassie communications to maintain this or do better they will need to also try to reduce other expenses as well, maybe they could look at switching their electricity and gas supplier to find a cheaper deal. Vassie communications can keep a tab on their expenses by calculating any expense as a percentage of sales, they can then look for rising or falling trends and measure these against their competitors.
Vassie communications had a percentage of 2% and their competitors had 4% which showed their competitors paid their staff more than Vassie. In 2016, Vassie Communications increased their wages percentage to 4.8% which was higher than that of their competitors.
Vassie communications current ratio is 2.275:1. This ratio measures the firm’s ability to pay its current liabilities. This means that for every £1 of debt the firm has, it has £2.275 to pay it. This is satisfactory, but Vassie communications should aim to get towards the recommended ratio of 2:1. Its competitor is close to this figure at 2.21:1.The acid test ratio measures Vassie Communication’s ability to meet its current liabilities assuming it cannot sell its remaining stock. The current acid test ratio of 0.675:1 shows that for every £1 of debt there is £0.675 to pay this. The ideal ratio is 1.6:1. But this is a big improvement on last year’s figure of 1.02:1.
The return on capital employed for Vassie communication for 2015 was 179% with their competitors having returns of 187% indicating that they were performing poorly as compared to their competitors. In 2016, the company had a net profit of £91975 and £40,000 capital employed, they then had a return of 229.93% which was higher than what they did in 2015 and what the competitors made. Currently, they are doing better than their competitors.
The debtor’s collection period indicates on average how long it takes the debtors of a business to pay a company what they owe. The debtor’s collection period for Vassie communications for 2015 was 6 days whereas their competitors had 27 days which showed that their competitors had more days in their collection period and with this Vassie communications was doing better with collecting their debts. In 2016, their debtor’s collection period rose to 7 days, but it was still very good. Vassie communications must look at ways to maintain this figure, by making sure they don’t raise the amount of credit sales that they allow. They could also make extra efforts to maintain this by calling or writing to their debtors and asking for payment earlier. They could even offer them a small discount of say 5% if they pay within 5 days of receiving their bill.
The creditors payment period tells a business on average how long it takes to pay their creditors, who are usually the suppliers. In 2015, it took Vassie communications about 97 days to pay up their debts which was not good whilst their competitors paid their debts in 34 days. In 2016, Vassie communications dropped their creditors payment period to 76 days which was an improvement over their 2015 figure, but they will still need to reduce the number of days since their creditors will expect them to pay back their debts in 28 days.
Vassie communications was able to turn over their stock in 154 days whilst their competitors were able to do the same in 38 days. In 2016 the stock turn for Vassie communications rose to 249 days but they will need to make sure they reduce their numbers.