Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Prufitability ratios hely in the analysis of the combined Impact of tquidity ratios, asset management ratios, and debt management ratios on the operating performance of

image text in transcribed
image text in transcribed
Prufitability ratios hely in the analysis of the combined Impact of tquidity ratios, asset management ratios, and debt management ratios on the operating performance of them Your bois has asked you to calculate the profitability ratlos of Bandal and Arts Inc. and make comments de les second-year performance as compared with its first-year performance The following shows kandall and Arts Inc. income statement for the last two years. The company had asets of 53,525 million in the first year and 55,639 milion in the second year. Common equity was equal to $1,875 million in the first year, and the company distributed 100w of its earnings out at dividends during the first and the second years. In addition, the mir did not issue new stock during either year. Randall and Arts Inc. Income Statement for the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net Sales 1,905 1,500 Operating costs except depreciation and amortization 1,610 1.495 Depreciation and amortization 95 60 Total Operating costs 1.705 1,555 Operating Income (or EBIT) Les interest 22 -6 aming before taxes (ET) 173 Les tres (259) -12 Net Income 130 200 09 Calculate the profitability ratio of Rantal and Arts Inc. in the following table. Convert al calculations to a percentage rounded to two decimal place Ratio Value Year 2 Year 1 6.829 Operating margin Profit margir Return on totales Return on common equity -1.97 Bone aming power 355 Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into both the survivabilley of a company and the benefits that shareholders receive. Identify which of the following statements are true about profitability ratios. Check all that apply. A higher operating margin than the Industry average indicates either lower operating costs, higher product pricing, or both 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 the return on assets ratio implies an increase in the assets a firm owns. If a company issues new common shares but its net income does not increase, return on common equity will increase

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

The Value Of Uncertainty Dealing With Risk In The Equity Derivatives Market

Authors: George Kaye

1st Edition

1848167725,1908979585

More Books

Students also viewed these Finance questions