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Profitability ratios are used to determine a companys overall financial condition. Using any three return or margin profitability ratios, what do they tell you about
Profitability ratios are used to determine a companys overall financial condition. Using any three return or margin profitability ratios, what do they tell you about your chosen company (Etsy) and its closest competitor (Shopify)? Do you see any red flags? How profitable is the company in relation to sales? How profitable is it in relation to assets? How profitable is it in relation to equity? Please be detailed.
Which of the two companies is the better run company?
\begin{tabular}{|c|c|c|c|c|c|c|c|} \hline \multicolumn{4}{|c|}{ Etsy Inc. } & \multicolumn{4}{|c|}{ Shopify Inc. } \\ \hline \begin{tabular}{l} Insert Financial Resource(s) \\ Used Here \end{tabular} & 2021 & 2022 & \begin{tabular}{c} Trailing Twelve Months (TTM) / \\ QoQ / Forecast \end{tabular} & \begin{tabular}{l} Insert Financial Resource(s) \\ Used Here \end{tabular} & 2021 & 2022 & \begin{tabular}{l} Trailing Twelve \\ Months (TTM) / \\ QoQ / Forecast \end{tabular} \\ \hline Margin Ratios & & & & Margin Ratios & & & \\ \hline Gross Profit Margin & 70.86% & 70.74% & & Gross Profit Margin & 54.19% & 50.66% & \\ \hline EBITDA & 471 million & (661 million) & & EBITDA & 314 million & (362 million) & \\ \hline Operating Profit & 466 million & (659 million) & & Operating Profit & 269 million & (822 million) & \\ \hline Net Profit & 493 million & (694 million) & & Net Profit & 2.9 billion & (3.5 billion) & \\ \hline Cash Flow & 785 million & 926 million & & Cash Flow & 2.5 billion & 1.6 billion & \\ \hline Profitability Ratios & & & & Profitability Ratios & & & \\ \hline Return on Assets (ROA) & 21.67% & 12.47% & & Return on Assets (ROA) & 32% & 21.89% & \\ \hline Return on Equity (ROE) & 73.56% & 73.56% & & Return on Equity (ROE) & 21.11% & 30.11% & \\ \hline Return on Invested Capital (ROIC) & 27.30% & 14.80% & & Return on Invested Capital (ROIC) & 47.92% & 50% & \\ \hline Interest Coverage & 60.11 & 54.1 & & Interest Coverage & 21.11 & 14.9 & \\ \hline \end{tabular}Step by Step Solution
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