Net Profit Margin
Net Profit Margin = (Net Profit / Revenue) * 100
Based on the financial statements provided, we will calculate the gross profit margin and net profit margin for XYZ Ltd and interpret the results.
Liquidity Analysis
Next, we will assess XYZ Ltd’s liquidity position by calculating the net current assets, current ratio, and acid test ratio. The net current assets indicate whether the company has sufficient current assets to cover its current liabilities. The current ratio measures the company’s ability to meet its short-term obligations using its current assets. The acid test ratio, also known as the quick ratio, assesses the company’s ability to pay off its current liabilities without relying on inventory.
Net Current Assets:
Net Current Assets = Current Assets – Current Liabilities
Current Ratio:
Current Ratio = Current Assets / Current Liabilities