Essay About Margincc’S Gross Profit Margin And Cc’S Gross Profit Margin

Profitability in Relation to Sales
ProfitabilityIn relation to SalesGross profit marginCC’s gross profit margin had an increasing trend from 2000 to 2002, and reached peak at 2002 as 30.12%. Percent had a steady decline from 2002 (30.12%) to 2005 (26.47%). CC’s gross profit margin is less than the industry average (32%) even at its peak. Without an adequate gross profit margin, accompany cannot pay for its operating expenses. In general, a companys gross profit margin should be stable unless there have been changes to the companys business model. Therefore, we recommend CC to (1) Review its pricing strategy, because of possibly exists lower pricing products than industry average. (2) Examine its COGS to avoid a high COGS lead to a lower gross profit margin.Operating Profit MarginSame as the gross profit margin, the operating margin went up from 2000 (4.38%) to 2002 (12.8%), and reached its highest point at 2002. After that the operating profit margin kept a decreasing trend from 2002 (12.8%) to 2005 (4.65%). Looks like CC do not have a good performance, because the average operating profit margin of industry is 14%.Operating profit margin is a good indicator of how well it is being managed and how risky it is. Highly variable operating margins are a prime indicator of business risk.Net profit marginCC’s net profit margin was 0.75% in 2000, reached its peak at 5.38%, in both 2002 and 2003, decreased after 2003. In 2005, CC had a 2.13% net profit margin.Net profit margin, or net margin, is equal to net income or profits divided by total revenue and represents how much profit each dollar of sales generates.(1) Advance its management efficiency.(2) Reduce its costs and expenses.In relation to investmentOperating income return  on investment[pic 1]CC’s ROI is 21.47% and 22.4% in 2002 and 2003 respectively. Since we do not have an industry average number of ROI, we don’ t know which position CC in.ROI is a performance measure, used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.Return on assetsCC reached its highest point of ROA in 2002 (16.72%) and 2003 (17.26%), but in others years were all far more less than the industry average of 17.46%.The ROA figure gives investors an idea of how effective the company is in converting the money it invests into net income. (1) Re-evaluate its business strategy as its ROA is low.(2) Reducing Asset Costs, especially interest.Return on equityCC had a 63.77% and 41.08% of ROE respectively in 2002 and 2003, which were both more than the industry average percent of 38.25%. However, it did not have a decent performance in others years.ROE is the amount of net income returned as a percentage of shareholders ‘equity.  As ROE is a yardstick of profitability, most people like to see high numbers for it, usually 15% or better. The lower the return on equity, the more inefficient the companys operations are making use of those funds. So we recommend CC to (1) Improve asset turnover. For example, Computerize Inventory and Order Systems, increase sales, and improve efficiency. (2) Use more financial leverage.(3) Distribute idle cash efficiently.