Dr Mo started his own medical practice at the end of 2020. At the end of his second year in business he thinks it prudent to compare his 2021 and 2022 financial results to reassess if it's better for him to work in the private sector or return to public service. You are his financial manager, and he provides you with the following financial information: Gross Profit Margin - 35% Net Profit Margin - 11% Return on capital employed(ROCE) - 13% Current Ration - 1.4:1 As at 31 December 2022 Revenue - R5,000,000 Cost of Sales - R2,880,000 Total running costs - R1,536,000 Current Assets - R660,00 Current Liabilities - R600,000 Total Capital Employed - R2,560,000 Required: 1. Explain to Dr Mo, an exceptional medical doctor but sadly lacking in financial acumen, give him five advantages and five disadvantages of using ratios to analyse and interpret performance.
Dr Mo started his own medical practice at the end of 2020. At the...
Dr Mo started his own medical practice at the end of 2020. At the end of his second year in business he thinks it prudent to compare his 2021 and 2022 financial results to reassess if it's better for him to work in the private sector or return to public service. You are his
Gross Profit Margin - 35%
Net Profit Margin - 11%
Return on capital employed(ROCE) - 13%
Current Ration - 1.4:1
As at 31 December 2022
Revenue - R5,000,000
Cost of Sales - R2,880,000
Total running costs - R1,536,000
Current Assets - R660,00
Current Liabilities - R600,000
Total Capital Employed - R2,560,000
Required:
1. Explain to Dr Mo, an exceptional medical doctor but sadly lacking in financial acumen, give him five advantages and five disadvantages of using ratios to analyse and interpret performance.
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