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Describe the ratio which Santander UK plc may calculate from the Income Statements shown in Exhibit 4 - Scottish Highers Business Management - Question g - 2023
Question g
Describe the ratio which Santander UK plc may calculate from the Income Statements shown in Exhibit 4. Describe the possible reasons for the increase in Santander U... show full transcript
Worked Solution & Example Answer:Describe the ratio which Santander UK plc may calculate from the Income Statements shown in Exhibit 4 - Scottish Highers Business Management - Question g - 2023
Step 1
Describe the ratio which Santander UK plc may calculate from the Income Statements shown in Exhibit 4.
Answer
The ratio that Santander UK plc may calculate from the Income Statements is the Profit (Loss) for the Year Ratio. This ratio is determined using the formula:
ext{Profit (Loss) for the Year} = rac{ ext{Profit (Loss) for the Year}}{ ext{Sales Revenue}} imes 100This ratio illustrates the Profit (Loss) for the Year as a percentage of the total sales revenue, reflecting the overall profitability after all expenses have been accounted for.
Step 2
Describe the possible reasons for the increase in Santander UK plc's Profit for the Year figure from 2020 to 2021.
Answer
Several factors may account for the increase in Santander UK plc's Profit for the Year from 2020 to 2021:
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Increase in Sales Revenue: A rise in sales revenue could indicate higher demand for Santander's products and services, contributing positively to profitability.
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Improved Gross Profit: An enhanced gross profit margin may suggest that the company has been able to manage its costs more effectively or increase pricing power without leading to a significant reduction in sales volume.
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Decrease in Expenses: A reduction in operational or non-essential expenses would lead to higher profits, as fewer costs would need to be deducted from revenue.
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Increase in Other Income: Any growth in income from secondary sources, such as investments or asset sales, would also positively affect the overall profit figure.