Accounting – 6.2 Interpretation of accounting ratios | e-Consult
6.2 Interpretation of accounting ratios (1 questions)
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(a) Three specific areas for profitability improvement are:
- Cost of Goods Sold (COGS): Reducing the cost of the products sold.
- Pricing Strategy: Reviewing and potentially adjusting the selling prices of goods.
- Operating Expenses: Identifying and reducing unnecessary overhead costs.
(b) Practical actions for each recommendation:
- COGS: Negotiate better prices with suppliers, explore alternative suppliers, or consider bulk purchasing discounts.
- Pricing Strategy: Conduct market research to determine optimal pricing, implement promotional offers, or consider tiered pricing.
- Operating Expenses: Review utility bills for potential savings, reduce discretionary spending (e.g., travel, entertainment), or explore energy-efficient equipment.