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Hi,
I am unsure how much detail is too much or too little in answering ratio analysis, if possible you can give me an example of a realistic answer (how many points/sentences) to score full/maximum marks given exam time based on the following (quartile Dec12 exam amended) answer/paragraph on profitability from BPP revision kit:
“Quartile has an ROCE significantly lower at 12% than the sector average of 16.8%. This mainly due to to the lower than average gross profit margin and consequent low operating profit margin. The operating expenses are actually lower (17%) as a percentage of revenue than the sector average of 23% so the problem lies between revenue and cost of sales. Inventory turnover is quite brisk (4.5 times compared to sector average of three times) but quartile mark-up of 33% is significantly below the sector average of 54%. Quartile is maintaining turnover by keeping prices down.”
Thanks
To say ROCE is “29% lower than the sector average” would be preferable
“… so the problem lies between revenue and cost of sales”
Now that you have identified the problem, this could do with some expansion. Where specifically is the problem?
You need to break your answer down into readable paragraphs
Consider this and compare it with yours:
“Quartile has an ROCE significantly lower at 12% than the sector average of 16.8%.
This is mainly due to to the lower than average gross profit margin and consequent low operating profit margin.
The operating expenses are actually lower (17%) as a percentage of revenue than the sector average of 23% so the problem lies between revenue and cost of sales.
Inventory turnover is quite brisk (4.5 times compared to sector average of three times) but quartile mark-up of 33% is significantly below the sector average of 54%.
Quartile is maintaining turnover by keeping prices down.”
Which is easier on the eye?
Hi just wondering if the interpretations question is a guaranteed in the exam as part of sect c. It came up in sept and Some course outlines make out that it will always come up as a long question in the latest exam structure. Can you help? I’ve tried to prep for anything to come up in sect c but would focus more on this if it’s a certainty.
“… if the interpretations question is a guaranteed in the exam …”
In this life, nothing is guaranteed except death and taxes (and a middle-order collapse by the England cricket team)
However, there is a good chance that interpretations will appear this week.
It used to be that cash flows would be more likely
Then it moved to cash flow with a bit of interpretation
Then a bit of cash flow and a lot of interpretation
And nowadays, it’s not unusual to have a question that is entirely interpretation
Not sure that that helps you!
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