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Business Level 3 Unit 2 D2 Evaluate The Financial Performance

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D2 evaluate the financial performance and position of a business using ratio analysis. In this task I will be evaluating all the ratios and explain how it will impact on Kai Enterprise. The ‘Gross Profit Margin’ for Kai Enterprise is 59.1%. This is a decent rate as it is more than 50% which means that the business has a higher portion of money which is accessible to spend on operational payment and also the business retains. Kai Enterprise should target to keep the firmness of expanding their sales turnover and additionally aiming to reduce the expense of sales to make sure that they have a safe and effective future, avoiding any financial crisis. Kai Enterprise owner can reinvest money into the business as they have enough money making it …show more content…

This basically demonstrates that the business is having more inflow of cash than outflows. For Kai Enterprise the first year of this percentage has been quite good. According to this rate Kai Enterprise has a splendid and bright future. This implies that Kai Enterprise owner needs to control their out flows wisely. Kai Enterprise owner will be required to find shareholders who will then invest the business leading to more money being produced. This will allow Kai Enterprise business to go to broadly and globally later on. Also the money can be utilized for the benefit of the business, for example Kai Enterprise can expand as a business or publicizing the product …show more content…

This ratio is exactly the equal to the similar industry average which shows that the company is doing not so bad. Furthermore, this shows that the company is able to pay off their short term liabilities simply with their current assets. This also means that the business is easy to pay off their short term liabilities in the forthcoming period of time. The ‘debtor’s payment period’ for Kai Enterprise is 34 days. This demonstrates that Kai Enterprise will take 34 days to recover all debts from their customers and partners. This number is quite good Compare to the similar industry average of debtors payment periods of 41 days. As they are getting their money back in a decent period of time (a month), this shows a positive and solid relationship between Kai Enterprise and its customers or partners. This will be great later on too, basically because they will remain fiscally stable even after lending their partners

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