QUESTION 2: 300 words

For each of the two companies, analyse their ability to successfully manage each of their categories of expenses in 2019 as compared to 2018. Use three profit margin ratios to support your answer and explain any change in the ability of each company to control costs. Note: ensure that you analyse in this question, not just describe the ratio values. (3 marks)

The three main profit margin metrics are gross profit margin (total revenue minus cost of goods sold (COGS) ), operating profit margin (revenue minus COGS and operating expenses), and net profit margin (revenue minus all expenses, including interest and taxes).

Gross Profit Margin = Gross Profit / Revenue x 100

Operating Profit Margin = Operating Profit / Revenue x 100

Net Profit Margin = Net Income / Revenue x 100

ZEN (150)

Gross Profit Margin: 2018: / 51 429 000 2019: / 55 037 000

Operating Profit Margin: 2018: / 51 429 000 2019: / 55 037 000

Net Profit Margin: 2018: 14 130 000 / 51 429 000 2019: 12 533 000 / 55 037 000

CEN (150)

Gross Profit Margin: 2018: / 1 974 685 866 2019: / 2 337 029 248

Operating Profit Margin: 2018: / 1 974 685 866 2019: / 2 337 029 248

Net Profit Margin: 2018: 217 371 365 / 1 974 685 866 2019: 288 663 735 / 2 337 029 248