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Title: BTEC Business Level 3, Unit 2, P7
Description: BTEC Business Level 3, Unit 2: Business Resources. P7 is based around the financial state of a business, in this case Next PLC. This goes through a number of accounting ratios. This is from the second assignment of this unit. I am a first year student and achieved distinction* distinction for this year, a distinction overall for this unit.
Description: BTEC Business Level 3, Unit 2: Business Resources. P7 is based around the financial state of a business, in this case Next PLC. This goes through a number of accounting ratios. This is from the second assignment of this unit. I am a first year student and achieved distinction* distinction for this year, a distinction overall for this unit.
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Ashleigh Still
Factsheet 4 – P7
Unit 2: Business Resources
Magda King
Financial State of Next PLC
When studying Next’s profit and loss and their balance sheet, it is clear to see their financial
state using accounting ratios
...
Current Ratio/Solvency
Current ratio shows how many assets a business has compared to its liabilities
...
Current ratio = current assets / current liabilities
NEXT
Current assets = £23
...
8m
£23
...
8m = 0
...
A good current ratio would be 2 as this means that for
every liability, the company has 2 assets to cover it
...
To do this,
they need to reduce their liabilities or increase their assets
...
The second ratio used (also described in Factsheet 2) is the Acid Test Ratio
...
This shows
Next how well their business can meet its liabilities without having to sell stock
...
5m - £7
...
3m
Current liabilities = £331
...
3m / £331
...
05
This is not a good ratio as it shows that there are too many liabilities to cover their assets
...
A good acid test ratio should be 1 or near around that, but no higher than 2 as this
would mean wasting money on assets
...
They can clearly see that they need to reduce their liabilities in
order to cover their assets
...
They need to make sure they invest wisely to cover
their assets
...
Gross Profit Percentage
This percentage shows gross profit as a percentage of the turnover
...
3m
Turnover = £3,441
...
3m / £3,441m X 100 = 30
...
37 of this as profit which they
must then pay tax on
...
Net profit / turnover X 100 = net profit percentage
NEXT
Net profit = £570
...
1m
£570
...
1m X 100 = 16
...
57 is pure profit for the company
...
Cost of sales / average stock = stock turnover (number of times)
NEXT
Cost of sales = £2,395
...
4m
£2,395
...
4m = 323
...
Average stock / Cost of sales x 365 = stock turnover (days)
Ashleigh Still
Factsheet 4 – P7
Unit 2: Business Resources
Magda King
NEXT
Average stock = £7
...
8m
£7
...
8 X 365 = 1
...
This is positive for the
company as it means that their stock isn’t just sitting in a warehouse and they are actually
selling it
...
3m
Capital employed =??
This cannot be calculated as Next PLC do not provide sufficient information to work this out
...
Debtors Collection
Debtors / credit sales X 365 = total number of days it takes debtors to pay
This cannot be calculated for Next PLC as there is no information on their credit or how many
debtors they have
...
Sales Percentage of Total Assets
Sales / total assets = asset turnover
NEXT
Sales = £3,441
...
8m
£3,441
...
8m = 1
...
Sales / fixed assets
And
Sales / current assets
NEXT
Sales = £3,441
...
3m
Current Assets = £23
...
1m / £2520
...
36
£3,441
...
5m = 146
Title: BTEC Business Level 3, Unit 2, P7
Description: BTEC Business Level 3, Unit 2: Business Resources. P7 is based around the financial state of a business, in this case Next PLC. This goes through a number of accounting ratios. This is from the second assignment of this unit. I am a first year student and achieved distinction* distinction for this year, a distinction overall for this unit.
Description: BTEC Business Level 3, Unit 2: Business Resources. P7 is based around the financial state of a business, in this case Next PLC. This goes through a number of accounting ratios. This is from the second assignment of this unit. I am a first year student and achieved distinction* distinction for this year, a distinction overall for this unit.