2. Analysing and interpreting the financial statements of Aurora Alternative Energy Ltd.
There are 4 possible ways to interpret the financial statements of Aurora Alternative Energy Ltd. This is by profitability, efficiency, liquidity, and financial gearing.
The date of 31- 12- 2007 Aurora Alternative Energy Ltd statements have been provided.
Profitability is the key target of any business. The profitability ratios so the success or the failure of some businesses. The ratios are there to express the profits made by a business so that on financial statements so that they compare how they are doing compared to other business and how they’ve done in the past.
Firstly Gross profit margin:
‘The gross profit margin relates to the gross profit of the business to the sales revenue generated for the same period. Gross profit represents the difference between sales revenue and the cost of sales. The ratio is therefore a measure of profitability in buying (or producing) and selling goods before any other expenses are taken into account.’
Source: McLaney E., Atrill P., Accounting an Introduction 3rd edition.
The ratio is found by doing: Gross Profit x 100
Sales Revenue
For AAEL in 2007 the figures are as follows: 50820 x 100
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