Profitability Statements and Margins

Sources for use with Section A

Extract A

What is Zwift?
Millions of people around the world enjoy cycling. However, the weather or road
conditions can sometimes make it difficult or even impossible to take part in this activity.
Zwift created a solution to this by introducing a virtual reality computer program, which
combines cycling with computer gaming. The cyclist rides their bicycle indoors while it is
attached to a fixed frame, so the bicycle does not actually move. This allows the cyclist to
watch their progress on a virtual road on a computer screen. People of all cycling abilities
can improve their fitness at the same time as enjoying social interaction with fellow
cyclists from around the world.
By paying Zwift a $10 fee every month to use the game, the cyclist’s efforts can be
displayed in a virtual world on the computer screen, complete with maps, roads,
landscapes and other riders to interact with.
Jon Mayfield and Eric Min, both keen cyclists, launched Zwift as a private limited
company in 2014, with an initial investment of $3m, followed by venture capital of $27m
in 2016. The statistics are certainly impressive. In October 2017, Zwift had more than
300,000 riders from over 150 countries. Between them they had collectively logged
218,128,291km. There are currently no direct competitors to Zwift and with several
additions to the game being planned its success looks set to continue.

Extract B

Selected financial information for Zwift for year ending 31 December 2017

Extract B

Selected financial information for Zwift for year ending 31 December 2017

Using the data in Extract B, calculate, to two decimal places, the gross profit margin for Zwift in 2017. You are advised to show your working.