Financial Guide for SMEs - SME Corporation Malaysia
Financial Guide for SMEs - SME Corporation Malaysia
Financial Guide for SMEs - SME Corporation Malaysia
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<strong>Financial</strong> <strong>Guide</strong> <strong>for</strong> <strong><strong>SME</strong>s</strong>Profitability RatiosThese ratios will measure your businessper<strong>for</strong>mance and ultimately indicate the levelof success of your operations. More discussionon these measures is included in Chapter 4.HINTUse gross and netmargin calculationsto measure andmonitor theprofitability of yourbusiness operationsGross margin ratio =Gross profitRevenueThis measures the percentage of sales proceeds remaining (after obtainingor manufacturing the goods sold) to pay the overhead expenses of thebusiness.Net margin ratio =Net profitRevenueThis measures the percentage of sales proceeds left after all expenses(including inventories), except income taxes. It provides a good opportunityto compare the return on income of the business with the per<strong>for</strong>mance ofsimilar businesses.TIPComparing your net and gross margin calculations to businesseswithin the same industry will provide you with comparativein<strong>for</strong>mation and may highlight possible scope <strong>for</strong> improvementin your margins26Chapter 2-5 p22-65 Eng.indd 268/15/11 5:01:51 PM
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