Financial ratios is one of many method use to analysis and determine how good is the business performance. These ratios can help company shareholders and other potential investors assess the company’s value. In the other hand, these ratios also very usefull for a researchers in statistical model to estimated future profit, corporate success, the assement of risk, and many more.
There are different types of financial ratios, including liquidity ratios, solvency ratios, profitability ratios and efficiency ratios. Each type of these ratios provide unique function and insight that usefull in different aspects of a company’s financial performance. To explore further, some explanations regarding to the types of financial ratios are written below.
In this case, the profitability ratio include the gross profit margin ratio and net profit margin ratio of Coffee Chain datasets will be analyzed. This ratio was chosen to get some insight regarding how efficient is the company in production process nor the company’s financial health. Thus, the variabel that will be used for this analysis are sales, margin, and profit.
Profitability ratio include gross profit margin ratio and net profit margin ratio are analyze based on its state and market size, therefore the data must be grouped first by following variables. To doing this task, the following syntax is used:
library(dplyr)
library(readxl)
Coffe_Chain <- read_excel("C:/Users/WORKPLUS/Downloads/Coffe_Chain.xlsx",
sheet = "data", col_types = c("text",
"date", "text", "text", "text", "text",
"text", "text", "text", "numeric",
"numeric", "numeric", "numeric",
"numeric", "numeric", "numeric",
"numeric", "numeric", "numeric",
"numeric"))
data_by_state <- data.frame(Coffe_Chain %>%
group_by(State, Market_Size) %>%
summarise(
total_sales = sum(Sales),
total_cogs = sum(COGS),
total_profit = sum(Profit),
total_margin = sum(Margin),
.groups = "drop"
))Formula
This following formula is use to calculate the gross profit margin ratio and net profit margin ratio:\[ \small \begin{aligned} \text{Gross Profit Margin Ratio} &= \frac{Margin}{Sales} \times 100\% \end{aligned} \]
\[ \small \begin{aligned} \text{Net Profit Margin Ratio}=\frac{Profit}{Sales} \times 100\% \end{aligned} \]
Syntax
This following syntax is use to calculate the gross profit margin ratio and net profit margin ratio:
gross_margin <- c((data_by_state$total_margin/data_by_state$total_sales) * 100)
net_margin <- c((data_by_state$total_profit/data_by_state$total_sales) * 100)
profitability <- data.frame(data_by_state$State,data_by_state$Market_Size,gross_margin,net_margin)Result
The results of Gross Profit Margin ratio and Net Profit Margin ratio can be seen in the table below:
Based on that result, it can be concluded that:
For major market, Texas has the highest value for gross profit margin ratio. It’s show that Texas has the best efficiency in production process. In the other side, the highest net profit margin ratio belong to Massachusetts hence Massachusetts’s major market has the best financial health among others.
For small market, Wisconsin has the highest value for gross profit margin ratio. It’s show that Wisconsin has the best efficiency in production process. In the other side, the highest net profit margin ratio belong to Iowa hence Iowa’s small market has the best financial health among others.