Industry Averages and Strengths and Weaknesses of Ratio Analysis
01Ratio College Shop Industry Comment
Average
Gross profit percentage ratio 54% 62% The College Shop is 8% below the industry average. They could make
this situation better by increase pricing by 8% or negotiate with
suppliers to get a better price.
Net profit percentage ratio 25% 32% The College Shop is 7% below the industry average and they can
overcome this by reducing expenses (wages), and they could also do
their own accounts instead of paying for someone externally to do it for
them.
ROCE ratio 113% 25% The College Shop is doing better than the industry average and does
not need to improve in this area.
Current ratio 2.74:1 1.9 The college shop is exceeding the industry average and does not need
to improve their performance in this area.
Acid test ratio 1.84:1 1.5 The college shop is exceeding the industry average and does not need
to improve their performance in this area.
Debtor collection period 38 days 30 days The college shop is 8 days over the industry average. The college
shop can overcome this by creating terms and conditions and set
payments to be made within 14 days. This is due to the fact that some
people will go over the 14 days and hopefully pay within 30 days.
Creditor payment period 33 days 32 days The college shop is exceeding the industry average and does not need
to improve their performance in this area.
Stockholding period in days 46 days 30 days The college shop is 16 days over the industry average and they can
rectify this by purchasing a computer stock control system. If they don’t
have the funds to do this they can create an effective manual stock
control. This will help the college shop reduce the stockholding by 16
days.
01Ratio College Shop Industry Comment
Average
Gross profit percentage ratio 54% 62% The College Shop is 8% below the industry average. They could make
this situation better by increase pricing by 8% or negotiate with
suppliers to get a better price.
Net profit percentage ratio 25% 32% The College Shop is 7% below the industry average and they can
overcome this by reducing expenses (wages), and they could also do
their own accounts instead of paying for someone externally to do it for
them.
ROCE ratio 113% 25% The College Shop is doing better than the industry average and does
not need to improve in this area.
Current ratio 2.74:1 1.9 The college shop is exceeding the industry average and does not need
to improve their performance in this area.
Acid test ratio 1.84:1 1.5 The college shop is exceeding the industry average and does not need
to improve their performance in this area.
Debtor collection period 38 days 30 days The college shop is 8 days over the industry average. The college
shop can overcome this by creating terms and conditions and set
payments to be made within 14 days. This is due to the fact that some
people will go over the 14 days and hopefully pay within 30 days.
Creditor payment period 33 days 32 days The college shop is exceeding the industry average and does not need
to improve their performance in this area.
Stockholding period in days 46 days 30 days The college shop is 16 days over the industry average and they can
rectify this by purchasing a computer stock control system. If they don’t
have the funds to do this they can create an effective manual stock
control. This will help the college shop reduce the stockholding by 16
days.
