- Delizio has also requested additional information on how his business is performing against similar Delicatessen businesses in Australia.
Using the Australian Tax Office’s Small Business benchmark website https://www.ato.gov.au/Business/Small-business-benchmarks/In-detail/Benchmarks-A-Z/D-F/Delicatessen//
Using the available data from the website above:
- Write down the Financial Year dates provided (2020-22)
- Find the benchmark figures for a Delicatessen.
- Note down the following figures for a business with a turnover equivalent to Delizio’s:
- Average Cost of Sales
- Average total expenses
- Gross Profit ratio
- Calculate the benchmark Gross Profit ratio using the calculation
Compare the benchmark Gross Profit ratio calculated in i) to Delizio’s Gross Profit ratio previously calculated on your spreadsheet. Comment on Delizio’s performance compared to the industry standard (benchmark Gross Profit ratio).
- Net Profit ratio
- Calculate the Benchmark Net Profit ratio using the calculation 100% – Average total expense
Compare the benchmark Net Profit ratio calculated in i) to Delizio’s Net Profit ratio previously calculated on your spreadsheet. Comment on Delizio’s performance compared to the industry standard (benchmark Net Profit ratio).
| Delizio’s Delicatessen | |||
| Profit & Loss Statement | 2020 | 2021 | 2022 |
| Sales | 3,945,000 | 4,561,230 | 4,789,500 |
| Less cost of goods sold | 2,643,000 | 3,040,250 | 3,192,500 |
| Gross Profit | 1,302,000 | 1,520,980 | 1,597,000 |
| Less Expenses | |||
| Selling expenses | 792,600 | 1,003,000 | 1,101,920 |
| Administration expenses | 37,000 | 37,500 | 38,000 |
| Financial expenses | 115,000 | 113,000 | 111,000 |
| Total expenses | 944,600 | 1,153,500 | 1,250,920 |
| Net Profit / (Loss) | 357,400 | 367,480 | 346,080 |
| Delizio’s Delicatessen | |||
| Balance Sheet | 2020 | 2021 | 2022 |
| Current Assets | |||
| Accounts receivable | 45,300 | 52,100 | 71,000 |
| Inventory | 186,500 | 214,000 | 263,200 |
| Cash | 8,000 | 5,800 | 1,200 |
| Total current assets | 239,800 | 271,900 | 335,400 |
| Non-Current Assets | |||
| Land and buildings | 175,000 | 211,000 | 211,000 |
| Shop equipment | 123,000 | 135,000 | 190,000 |
| Motor vehicles | 42,000 | 44,000 | 39,000 |
| Total non-current assets | 340,000 | 390,000 | 440,000 |
| Total Assets | 579,800 | 661,900 | 775,400 |
| Current Liabilities | |||
| Accounts payable | 204,300 | 252,650 | 331,300 |
| Bank overdraft | – | – | 56,020 |
| Total current liabilities | 204,300 | 252,650 | 387,320 |
| Non-Current Liabilities | |||
| Mortgage | 84,000 | 81,000 | 79,000 |
| Bank Loan | 17,000 | 73,000 | 120,000 |
| Total non-current liabilities | 101,000 | 154,000 | 199,000 |
| Total Liabilities | 305,300 | 406,650 | 586,320 |
| Net Assets | 274,500 | 255,250 | 189,080 |
| Equity | |||
| Capital | 299,600 | 274,770 | 256,200 |
| Add Net Profit | 357,400 | 367,480 | 346,080 |
| Less Drawings | – 382,500 | – 387,000 | – 413,200 |
| Total Equity | 274,500 | 255,250 | 189,080 |
| Client Name : Delizio’s Delicatessen | ||||||||
| Ratio Calculation Worksheet | ||||||||
| Ratios | Calculation Used | 2021 | 2022 | Comment | ||||
| Liquidity (express as a ratio e.g. 1:1) | ||||||||
| Current ratio | Current Assets/Current Liabilities | 1.08:1 | 0,87:1 | Current ratio shows that company doesn’t have enough liquid assets to cover the short-term liabilities as the ratio below 1.2-2. Company should take steps to improve the current ratio. | ||||
| Quick ratio | (Current Assets-Inventory)/Current Liabilities | 0.23:1 | 0.19:1 | Decline in quick ratio represents an increse in short-term debt, a decrese in current assets or combination of both. Ideal quick ratio should be above 1. Company should work on increasing quick ratio. | ||||
| Profitability (express as a percentage %) | ||||||||
| Gross profit rate | Gross profit/Sales x 100 | 33.35% | 33.34% | Both years have similar gross profit margin | ||||
| Net profit rate | Net profit / Sales x 100 | 8.06% | 7.23% | Company had a decrese in net profit rate in 2022. Company should take steps to increse net profit rate to increse profit. | ||||
| Activity | ||||||||
| Average inventory | (Opening Inventory+Closing Inventory)/ number of the periods | 200250 | 238600 | No comment required | ||||
| Inventory turnover rate | Cost of goods sold/Avarage Inventory | 15.18 | 13.38 | Low turnover indicates weaker sales and declining demand for the company’s product. Ideal ITR is between 5 and 10. | ||||
| Number of days inventory held | 365 Days / Inventory Turnover Ratio | 24.04 | 27.28 | No comment required | ||||
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