Chapter 2

1. [Basic Financial Ratios] A venture recorded revenues of $1 million last year and net profit of $100,000. Total assets were $800,000 at the end of last year.

1. Calculate the ventures net profit margin.
2. Calculate the ventures asset turnover.
3. Calculate the ventures return on total assets.

2. [Financial Ratios and Performance] Following is financial information for three ventures:

Venture XX Venture YY Venture ZZ

After-tax Profit Margins 5% 15% 25%

Asset Turnover 2.0 times 1.0 times 3.0 times

1. Calculate the return on assets (ROA) for each firm.
2. Which venture is indicative of a strong entrepreneurial venture opportunity?
3. Which venture seems to be more of a commodity type business?