Profitability/Operating efficiency: Identify and explain which company has been more efficient in controlling its operating activities - NSC Accounting - Question 3 - 2022 - Paper 1

To determine which company has been more efficient in controlling operating activities, we examine two key financial indicators: operating expenses on sales and net profit on sales.

1. Operating Expenses on Sales:

   • Nigel Ltd has operating expenses on sales at 23.0%, which is lower compared to Vrede Ltd at 23.9%. This indicates that Nigel Ltd is more efficient in managing its operating costs relative to its sales.

2. Net Profit on Sales:

   • Nigel Ltd reports a net profit on sales of 29.9%, compared to Vrede Ltd which has a significantly lower net profit margin of 7.0%. This highlights Nigel Ltd's superior ability to convert sales into actual profit, demonstrating better operational efficiency.

In conclusion, Nigel Ltd is more efficient than Vrede Ltd in controlling its operating activities, as shown by its lower operating expenses and higher net profit margin.