Sioux's Appliances Maintained A Constant Gross Profit Ratio Of About 65% During The Years 20X3-20X5 - Accounting Assignment Help

Assignment Task

Sioux's Appliances maintained a constant gross profit ratio of about 65% during the years 20X3-20X5. This means that only 35% forms part of the company cost of sales. High gross profit margin like in this case, provide ample working capital for the company hence a sign of a good financial health.
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Net profit profit can be associated to the company success. The financial metric represent what is left to 4. the company after deducting the expenses associated with the business operation. For the three financial years, the company net profit reduced from 16.29% in 20X3 to 1.86% in 20X5. The trend shows that the company is not in good financial health because most of its income is used to pay C. a
business expenses. 
1. Sioux's Applianc should improve on several areas to keep it going, first; the company needs to maintain a ..od ratio between its expenses and revenue. For instance, it recorded high gross profit of of its sales. However, this is being consumed by most of the operating expenses leaving a smaller margin as net profit. The company can curb this problem by reducing its operating expenses by seeking cheaper means of service provision.

2 A decreasing inventory turnover for the three years means that most of Sioux's Appliances stocks are held up in its warehouses for a longer period of time. It, therefore, incurs a high cost r. la es saol A.P eak: 
in keeping the stocks and again depriving the business of operating funds. The company should invest highly in advertising and sales promotion to accelerate its stock movement rate.

3. The liquidity position of the company is also not good. This is indicated by the fact that it has a 
wing debt capital on over 50% of its total asse The trends indicate that the company is highly geared and likely to go into receivership.. The only way to reverse this problem is to seek for alternative means of funding the business using equity capital and ploughing back all its annual profits into the business.

4. Sioux's Appliances have not been profitable and the company should try to change to other forms of business such as privately owned entity or partnership. The change in ownership will bring more technical experiences and funds which can be used to improve the company performance. o,, 1.44,1 rv"

5. Because of the exis e and maintenance of a large portion of debt capital, Sioux's Appliances for the past three years settle a high interest expense. The problem can only be solved by reducing the loan payable by the company to improve its working capital.

6. Lastly, the company should review its credit terms to shorten its debt collection period. This will ensure a sufficient provision of working capital for its operations. 

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