Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsAdam’s Computer BagsIncome StatementFor the Year EndingYear One%Sales RM52,000 (100)Less cost ofgoods soldGross profitLess operatingexpensesRM31,200 (60)RM20,800 (40)RM15,600 (30)Net profit RM5,200 (10)Sales less cost of goods soldMark-up (%) = Cost of goods soldRM52,000 less RM31,200=RM31,200= 66.67%Net sales - cost of goods soldGross margin (%) = Net sales X 100RM52,000 less RM31,200=X 100RM52,000= 40%Net profi t (value)Net margin (%) =Net sales (value)RM5,200=RM52,000= 10%X 100X 100ExpensesBreak-even (RM) = 1 less (Cost of goods sold)(Net sales)RM15,600= 1 less (RM31,200)(RM52, 000)= RM15,6001 less 0.6= RM39,000 sales required before any profi ts can be madeSummary of Adam’s Computer BagsProfitability MeasuresMark-up 66.67%Gross margin 40 %Net margin 10 %Break-even RM39,000TIPCompare yourprofitability measures tothe businesses withinthe same industry toensure that you arebeing competitive andachieving maximumprofit potential42Chapter 2-5 p22-65 Eng.indd 428/17/11 1:34:38 PM