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Accounting Assignment

Company Profitability and Solvency Status

Profitability refers to a scenario wherein company’s profits i.e. excess of its income over expense is measured while solvency refers to its ability to pay off its debts

Company’s profitability can be estimated by below ratios:-

• Gross Profit Ratio –This ratio helps in determining the manufacturing ability of any company.

Gross Profit Ration = Gross Profit/Sales

=284589/291403

=97.7%

97.7% is very healthy gross profit ration, however, most of the goods sold were part of inventory.

• Net Profit Ratio – Net profit ratio helps in estimating the overall profitability of a company

Net Profit Ratio = Net Profit/Sales

=135505/291403

=46.5%

46.5% net profit ratio is very sound further actual cost of goods sold can be derived post deriving of co....