Compute the following profitability ratios of the company for themost recent two years, show all values in the computations:1.Asset Turnover2.Profit margin ratio(Net Income/Net Sales)3.Return on total assets (Net Income/Average Total Assets)4.Return on stockholders’ equity5.Basic Earnings per share (EPS)Based on the results above, what conclusions can you make about the company’s overall profitability and efficient use of assets? 20192018AssetsCurrent assets:Cash and cash equivalents19,07910,019Marketable securities35,77631.095Accounts receivable, net of allowances of $206 and $229 as of December 31, 2019 and December 31, 2018, respectively9,5187,587Prepaid expenses and other current assets1,8521,779Total current assets66,22550,480Property and equipment, net35,32324,683Operating lease right-of-use assets, net9,460Intangible assets, net8941,294Goodwill18,71518,301Other assets2,7592,576Total assets133,37697,334Liabilities and stockholders' equityCurrent liabilities:Accounts payable1,363820Partners payable86541Operating lease liabilities, current80011.7355,509147Accrued expenses and other current liabilitiesDeferred revenue and deposits269Total current liabilities15,0537,017Operating lease liabilities, non-current9,524Other liabilities7,7456,190Total liabilities32,32213,207Commitments and contingenciesStockholders' equity:Common stock, S0.000006 par value; 5,000 million Class A shares authorized, 2,407 million and 2,385 million shares issued and outstanding, as of December 31,2019 and December 31, 2018, respectively; 4,141 million Class B shares authorized, 445 million and 469 million shares issued and outstanding, as of December 31,2019 and December 31, 2018, respectively.Additional paid-in capital45,85142,906Accumulated other comprehensive loss(489(760)Retained earnings55,69241.981Total stockholders' equity101,05484,127Total liabilities and stockholders' equity133,37697,334 Year Ended December 31,201920182017Revenue70,69755,83840,653Costs and expenses:Cost of revenue12,7709,3555,454Research and development13,60010,2737,754Marketing and sales9,8767.8464,725General and administrative10,4653,4512,517Total costs and expenses20,45046,71130,925Income from operations23,98624,91320,203Interest and other income, net826448391Income before provision for income taxes24,81225,36120,594Provision for income taxes6,3273,2494,660Net income18.48522,11215.934

Answered: Compute the following profitability…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Compute the following profitability ratios of the company for the

most recent two years, show all values in the computations:

1.Asset Turnover

2.Profit margin ratio(Net Income/Net Sales)

3.Return on total assets (Net Income/Average Total Assets)

4.Return on stockholders’ equity

5.Basic Earnings per share (EPS)

Based on the results above, what conclusions can you make about the company’s overall profitability and efficient use of assets?

2019
2018
Assets
Current assets:
Cash and cash equivalents
19,079
10,019
Marketable securities
35,776
31.095
Accounts receivable, net of allowances of $206 and $229 as of December 31, 2019 and December 31, 2018, respectively
9,518
7,587
Prepaid expenses and other current assets
1,852
1,779
Total current assets
66,225
50,480
Property and equipment, net
35,323
24,683
Operating lease right-of-use assets, net
9,460
Intangible assets, net
894
1,294
Goodwill
18,715
18,301
Other assets
2,759
2,576
Total assets
133,376
97,334
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
1,363
820
Partners payable
86
541
Operating lease liabilities, current
800
11.735
5,509
147
Accrued expenses and other current liabilities
Deferred revenue and deposits
269
Total current liabilities
15,053
7,017
Operating lease liabilities, non-current
9,524
Other liabilities
7,745
6,190
Total liabilities
32,322
13,207
Commitments and contingencies
Stockholders' equity:
Common stock, S0.000006 par value; 5,000 million Class A shares authorized, 2,407 million and 2,385 million shares issued and outstanding, as of December 31,
2019 and December 31, 2018, respectively; 4,141 million Class B shares authorized, 445 million and 469 million shares issued and outstanding, as of December 31,
2019 and December 31, 2018, respectively.
Additional paid-in capital
45,851
42,906
Accumulated other comprehensive loss
(489
(760)
Retained earnings
55,692
41.981
Total stockholders' equity
101,054
84,127
Total liabilities and stockholders' equity
133,376
97,334

Year Ended December 31,
2019
2018
2017
Revenue
70,697
55,838
40,653
Costs and expenses:
Cost of revenue
12,770
9,355
5,454
Research and development
13,600
10,273
7,754
Marketing and sales
9,876
7.846
4,725
General and administrative
10,465
3,451
2,517
Total costs and expenses
20,450
46,711
30,925
Income from operations
23,986
24,913
20,203
Interest and other income, net
826
448
391
Income before provision for income taxes
24,812
25,361
20,594
Provision for income taxes
6,327
3,249
4,660
Net income
18.485
22,112
15.934

Expert Solution

Step 1

Ratio Analysis

It is a technique by which the financial position of a company is analyzed. This technique involves computing different ratios in order to compare the current position of the company with earlier period or to evaluate the current position.

Step 2

Requirement 1,2&3:

The asset turnover, profit margin, and return on total asset ratio are calculated as follows:

The resultant table is as follows:

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