Two companies operate in the retail sector.

Financial statement(extracts) for the year ending 30th June

XY Ltd PV Ltd
Rs000 Rs000
Operating profit 25,000 28,000
Net assets 80,000 75,000
Sales revenue 90,000 85,000

Required:
(a) Calculate the following ratios for both companies:
(i) Operating profit margin
(ii) Net asset turnover
(iii) Return on net assets/capital employed

(b) Compare the performance of the two companies based on your answer in (a) above.

Answer
XY Ltd PV Ltd
Operating profit margin 27.78% 32.94%
x Net asset turnover 1.13 1.13

= Return on net assets 31.25% 37.33%

ar ending 30th June 2023 are:

Du Pont analysis
ROCE = Operating profit margin x Net asset turnover
Operating profit / Net asset = Operating profit / sales revenue x Sales revenue / Net asset

(a) above.
evenue / Net asset