NSC Accounting Analysis and interpretation of Financial Statements: Profitability/Operating efficien

Question

Profitability/Operating efficiency:

Identify and explain which company has been more efficient in controlling its operating activities. Quote TWO financial indicators.

Nigel Ltd has demonstrated greater efficiency in managing its operating activities compared to Vrede Ltd. This can be substantiated with the following financial indicators:

1. **Operating Expenses on Sales**: Nigel Ltd's operating expenses as a percentage of sales are 23.0%, which is lower than Vrede Ltd's 23.9%. This indicates that Nigel Ltd retains a higher proportion of revenue after accounting for operating costs.
2. **Net Profit on Sales**: Nigel Ltd has a net profit on sales of 9.2%, outperforming Vrede Ltd’s 7.0% net profit. This comparison reveals that Nigel Ltd is more effective in converting sales into actual profit.

These indicators suggest that Nigel Ltd is more proficient in controlling its operating activities, resulting in higher profitability.

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

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

Identify and explain which company has better profitability/operating efficiency.

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