Complete 5 page APA formatted essay: Accounting and finance for managers.
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The Return on Capital Employed ratio is used to analyse a company’s position in terms of the return or profit it gains on the funds invested by the company’s shareholdersIt shows the effectiveness of the company’s management It shows the effectiveness and performance of the company’s management to obtain more returns on the shareholders’ investment. It is of importance to the company’s management as well as investors and shareholders being a performance indicator for the company. The ROCE ratio for the Glaxo Smithkline plc is 102.78%, which shows that the company has been able to utilise the funds invested by shareholders in an profitable manner.The Asset Turnover ratio reveals the management’s efficiency in utilising the company’s assets towards sales and revenue generation (Meigs &amp. Meigs, 1993). It is of particular interest to company’s management in evaluating their policies and the revenue generation. The Glaxo Smithkline plc’s asset turnover ratio is 90%, which shows that the sales generated by the company proved to be 90% utilisation of the company’s assets. It is a sign of an above-average performance of the company’s management.The Gross Profit Margin Percentage evaluates the percentage of profit earned by a company on sales after the production and distribution activities (Mcmenamin, 1999). This ratio analyses the company’s profit margin before accounting for various operating costs. This ratio is of critical importance to both the management and investors, in order to keep an eye over the company’s income level and profit margin. The gross margin percentage for the company in consideration is 78.83%, which indicates that the company only loses about 22% of its sales revenue in the production and distribution activities. It is an indicator of the company’s gross profitability.