AF312: Gross profit margin - Understanding of the Financial Performance of the Business - Accounting and Finance Assessment Answer

Internal Code: 1AGGGE Subject Code: AF312

Accounting and Finance Assessment Answer

Task: QUESTION 1 Study the following statement of income for Laurentia clothing stores and answer the questions that follow. Required: a. Analyse trends in the company through a horizontal analysis. b. Calculate the following ratios: i. Gross profit margin. ii. Net profit margin. iii. Interest coverage. c. Evaluate the performance of the organisation based on your analysis of (a) and (b) above. d. Explain what management is doing right and what they can do to improve the performance of the business. e. Explain four limitations of the analysis given above. f. State what non-financial information could have been useful for a better understanding of the financial performance of the business and explain precisely how it would have been useful. g. As a financial analyst, identify and briefly explain two things that might assure you about the quality of earnings presented above. QUESTION 2 The accountant must exercise their professional judgment in making relevant choices between alternatives. Discuss this statement and the consequences thereof.

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