Blog: Fin621 GDB No. 3 solution

Semester “Spring 2011”“Financial Statement analysis(FIN621)”

This is to inform that next Graded Discussion Board (GDB)will be opened according to the following schedule

Schedule

Opening Date and Time June 30 , 2011 At 12:01 A.M. (Mid-Night)

Closing Date and Time July 04 , 2011 At 11:59 P.M. (Mid-Night)

Topic/Area for Discussion“ 

Profitability of a business”Note: The discussion question will be from the area/topic mentioned above. So start learning about the topic now.

SOLUTION:

Following are possible ways to increase the gross profit

->An increase in selling price without corresponding increase in costs
->A decrease in costs without corresponding reduction in selling price
->Opening stock in trade is valued at a figure lower than should have been
->Purchases are stated at a lower figure than it should have been because of omission of invoices for purchases
->Sales figures are inflated because goods sent on consignments may have been inadvertently included
->Closing stock is valued at a higher figure than it should have been.

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Following are possible ways to increase the gross profit

1. An increase in selling price without corresponding increase in costs
2. A decrease in costs without corresponding reduction in selling price
3. A decrease in direct costs
4. Increase in sales volume by reducing price, if it result in extra sales
5. Advertisement if it results in increased sales