Accounting Basics for Managers Essay Example | Topics and Well Written Essays - 1250 words

Accounting Basics for Managers - Essay ExampleIn the financial year 2012, Home entrepot shows impressive growth both financially and operationally. In the financial year 2011, Home Depot revenue increased by 3.53% to a striking $ 70,395 one thousand thousand which has resulted in the operating profit increased by 14.08%. Following its operational growth strategy, Home Depot has introduced diversity in its business. The company is showing elicit in covering all the horizons of the globe by opening more and more stores in various areas of the globe as it planning to serve a diverse range of customers. Gross profit perimeter is one of the key profitability ratio indicators which indicate how well a company is in the adjoin of utilizing its working capital in earning the desired level of profit. In order to calculate the gross profit margin ratio, the gross profit (i.e., sales little the cost of sales) is divided by the revenue of the company. As apparent, the gross profit of the co mpany has increased slightly from the previous financial year which could be payable to the fact that the cost of sales of the company increased with a bigger percentage as compared to the percentage of the revenue of the company. This could be due to increased naked materials prices from the supplier which the company could not recover from the customers through increased selling price. The next profitability indicator is the net profit margin. The net profit margin is calculated by dividing the net profit (i.e., gross profit less administrative and selling expenditure) with the total revenue.