Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can someone help me with this problem? Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt

Can someone help me with this problem?
image text in transcribed
image text in transcribed
Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Gadget Twin Inc. and make comments on its second-year performance as compared with its first-year performance. The followine shows Gadget Twin Inc:'s income statement for the last two years. The company had assets of $5,875 million in the first year and $9,398 million in the second vear, Common equity was equal to $3,125 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Gadget Twin Inc. Income Statement for the Year Ending on December 31 (Millions of dollars) Calculate the profitability ratios of Gadget. Twin inc. in the following table. Convert all calculations to a percentage rounded to two decimal places. Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios aive insights into both the survivability of a company and the benefits that shareholders receive. Identify which of the following statements are true about profitability ratios. check all that apoly, If a company has a profit maroin of 1045, it means that the company earned a net income of $0.10 for each dollar of sares. If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. An increase in a company's earnings means that the profit margin is increasing

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fiduciary Finance Investment Funds And The Crisis In Financial Markets

Authors: Martin Gold

1st Edition

1848448953, 9781848448957

More Books

Students also viewed these Finance questions

Question

Know why employees turn to unions

Answered: 1 week ago

Question

Understand the process of effective succession planning

Answered: 1 week ago

Question

Understand the history of unionization

Answered: 1 week ago