A higher value of return on equity employed indicates the company is able to generate a higher profitability while lower value shows that the company is generating a lesser earning and lower profitability.
Therefore, from the bar chart we know that HupSeng is able to generate high profitability then other two companies with have highest value of return on capital employed, 28.03% compare to other two companies. For Hwa Tai, who have -2.86% on return on capital employed, it show that Hwa Tai was generating a loss in business and lowest profitability compare to other two companies.
For London Biscuits which have 7.30% in return on capital employed, it means that London biscuits able to generate earning but less than HupSeng and have higher profitability than Hwa Tai but lower than HupSeng. It was because London Biscuits return on capital employed value is between on HupSeng and Hwa Tai.
Gross Profit Margin
Gross Profit Margin is a financial metric that is used to evaluate a firm financial health by acknowledging the proportion of money left over from revenue after accounting for the cost of goods sold.(Deb Katula, 2013) It function as the main source for paying additional expenses and future savings.
Gross Profit Margin= (Gross Profit)/Revenue×100
NOTE: Gross Profit = Revenue – Cost of Goods Sold (COGS)
Company Calculation Interpretation
Hwa Tai = (66,446,623-49,501,691)/66,446,623 X 100
=16,944,932/66,446,6230 X 100
= 25.50% The gross profit margin of Hwa Tai is 25.50%. So, the company gained RM25.50 gross profit for every RM100 of sales revenue generated before operating expense was paid.
HupSeng = (247,818,145-159,924,152)/247,818,145 X 100
=87,893,993/247,818,1450 X 100
= 35.47% The gross profit margin of HupSeng is 35.47%. So, the company gained RM35.47 gross profit for every RM100 of sales revenue generated before operating expense was paid.
London Biscuits = (182,055,132-135,814,139)/182,055,132 X 100
=46,240,993/182,055,132 X 100
= 25.40% The gross profit margin of London Biscuits is 25.40%. So, the company gained RM25.40 gross profit for every RM100 of sales revenue generated before operating expense was paid.
Compare & Comment
From the bar chart shown above, the highest gross profit margin is HupSeng, with 35.47% compare to other two companies and the lowest gross profit margin is London Biscuits,with 25.40%. Hwa Tai gross profit margin is just more than London Biscuits about 0.10%, so it gross profit margin value was 25.50%.
Gross profit margin is able to reveal the financial health of a certain company. Low margin shows that the company unable to cope with the cost of production whereas high margin indicate that the company is in a good financial health as well as showing that the company is efficient in manufacturing and distributing processes.
For the bar chart shown that HupSeng is gaining RM35.47 gross profit of every RM100 of sales revenue generated before the operating expenses. It more than Hwa Tai...