Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 10E
Summary Introduction
Concept Introduction:
Profit Margin Ratio:
Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. The formulas to calculate the Profit margin is as follows:
Return on assets/ investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the
To calculate: the profit margin ratio, total asset turnover, and return on total asset ratio for the year 2018 and 2017 and comment on the results.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Identify which of the following six metrics a through f best completes questions 1 through 3 below. a. Days’ sales uncollected d. Return on total assets b. Accounts receivable turnover e. Total asset turnover c. Working capital f. Profit margin 1. Which two ratios are key components in measuring a company’s operating efficiency? Which ratio summarizes these two components? 2. What measure reflects the difference between current assets and current liabilities? 3. Which two short-term liquidity ratios measure how frequently a company collects its accounts?
Using the data for 2018 and the industry norms, compute the financial ratios that were discussed in this chapter (current ratio, return on assets, operating profit margin, total asset turnover, debt ratio, and return on equity).
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?
Chapter 13 Solutions
Loose Leaf for Financial Accounting: Information for Decisions
Ch. 13 - Explain the difference between financial reporting...Ch. 13 - Prob. 2DQCh. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - Prob. 10DQ
Ch. 13 - Prob. 11DQCh. 13 - Prob. 12DQCh. 13 - Prob. 13DQCh. 13 - Prob. 14DQCh. 13 - Prob. 15DQCh. 13 - Prob. 16DQCh. 13 - Prob. 17DQCh. 13 - Prob. 1QSCh. 13 - Prob. 2QSCh. 13 - Prob. 3QSCh. 13 - Prob. 4QSCh. 13 - Prob. 5QSCh. 13 - Prob. 6QSCh. 13 - Prob. 7QSCh. 13 - Prob. 8QSCh. 13 - Which of the following gains or losses would...Ch. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 10ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 - Prob. 15ECh. 13 - Prob. 16ECh. 13 - Prob. 1PSACh. 13 - Prob. 2PSACh. 13 - Prob. 3PSACh. 13 - Prob. 5PSACh. 13 - Prob. 6PSACh. 13 - Selected comparative financial statements of...Ch. 13 - Prob. 2PSBCh. 13 - Prob. 3PSBCh. 13 - Prob. 5PSBCh. 13 - Prob. 6PSBCh. 13 - Prob. 13SPCh. 13 - Prob. 2FSACh. 13 - Prob. 3FSACh. 13 - Prob. 1BTNCh. 13 - Prob. 5BTN
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- A company’s comparative statements are given below. Please conduct the following analyses: c. Calculate the three profitability ratios for year 2017 and show how ROE can be derived from the DuPont formula for this company. d. What do the analyses tell you about the company’s financial performance?arrow_forwardCompute the following for year 20171. Gross Margin Ratio2. Operating Profit Margin3. Net Profit Margin or Return on Sales4. Return on Equity5. Return on Assetsarrow_forwardDetermine Profit Margin,Asset Turnover,Earnings Per Share,Price-Earning Ratios, Pay out ratio and Debt to asset ratio for 2016 and 2017 and explain briefly whether or not the company experiences improvement in the financial positon and operating for the period from 2016 to 2017.arrow_forward
- Using average value, calculate TWO (2) relevant financial ratios for each of the following areas that are useful in determining the overall performance of the company for 2019 and 2018. Ability to meet short term maturing financial obligations. Effectiveness in managing assets and efficiency in handling operations Profitability and overall operating results Ability to service debt and the degree of financial risk ROE using the DuPont Methodarrow_forwardProblem 1: Viance Queen Company Required: Compute for the company’s profitability and operating efficiency ratios for 2019 Compute for the financial health ratios of the company for 2019 A.Profitability ratio a.Gross Profit Ratio b. Operating income margin c. Net profit margin d. Return on Assets: ROA (NI/Total Assets) ROA (NI/Average Assets) ROA (EBIT/Total Assets) ROA (EBIT/Average Assets) ROE (NI/Capital) ROE (NI/Average Capital B.Operating Efficiency a. Asset Turnover b. Fixed Asset Turnover c. Inventory Turnover d. Days in Inventory e. AR Turnover f. Days in AR C.Financial Health/ (Solvency and Liquidity) Solvency ratio: a. Debt to equity ratio b. Debt Ratio c. Equity Ratio d. Interest Coverage Ratio Liquidity ratio: a. Current Ratio b. Quick Ratioarrow_forward1. Using the financial statements above, prepare a common size income statement and balance sheet.2. Using the financial statements above, prepare a trend analysis of the the income statement and balance sheet.3. Using the financial statement above, find the following ratios for both 2017 and 2018. Current Ratio Quick RatioInventory Turnover Ratio Times Interest Earned Debt Ratio Equity Ratio Net Profit Margin Gross Profit Margin Fixed Asset Turnover Total Asset Turnoverarrow_forward
- Solve and perform the different financial ratios using the financial statements of XYZ Company for the year 2021. 1. Current Ratio 2. Quick Ratio 3. Receivables Turnover 4. Inventory Turnover 5. Debt Ratio 6. Equity Ratio 7. Times Interest Earned 8. Gross Profit Margin 9. Operating Profit Margin 10. Net Profit Marginarrow_forwardCalculate each of following ratios for year 2017 using the financial statement in Table 1-3. Total Asset turnover Fixed asset turnover Liquidity Ratio Current ratio Quick ratio Liability to assets Interest coverage ratio Profitability Ratios ROA ROE Gross profit margin Operating profit margin Net operating profit margin Table 1: Balance Sheet Statement for 2017 Cash $7,282 Short-Term invest. 20,000 Accounts Receivable 632,160 Inventories 1,287,360 Total Current Assets 1,946,802 Gross Property, Plant & Equipment 1,202,950 Less: Depreciation 263,160 Net Property, Plant & Equipment 939,790 Total assets $2,886,592 Accounts payable $324,000 Notes payable 720,000 Accruals 284,960 Total Current Liability 1,328,960 Long-term debt 1,000,000 Common stock 460,000 Retained earnings 97,632 Total equity 557,632 Total Liability & Equity $2,886,592 Table 2: Income Statement for 2017 Sales $5,834,400 COGS 4,980,000 Depreciation 116,960 Other expenses…arrow_forwardUsing the financial statements in the image, calculate the following ratios for both the FY 2017 and FY 2018: Current Ratio Quick Ratio Total Asset Turnover Average Collection Total Debt to Total Assets Times Interest Earned Net Profit Margin Return on Assets Return on Equity Modified Du Point Equation for FY 2018 PE Ratio Market to Book Ratioarrow_forward
- (A)Prepare ratio analyses (for 2019, 2018, and 2017) for both companies.You should include the following ratios in your computations: 1. Profitability ratios Gross Profit margin Profit margin Return on assets Return on equity 2. Productivity Inventory Turnover Accounts Receivable Turnover PPE Turnover Asset Turnover 3. Solvency Debt-to-equity Times interest earned Return on Financial leverage 4. Liquidity Current Ratio Quick Ratio Operating cash flow to current liabilities Working capitalarrow_forwardFrom the given Statement of Financial Position and Income statement, solve for the following: 1) Compute the FINANCIAL ratios that measure: c) Operating Activity -Accounts Receivable Turnover -Days Sales in Receivable -Inventory Turnover -Days in Inventory d) Profitability -Earnings per Share -Return on Asset -Return on Equity -Operating Profit Margin -Net Profit Margin 2) Analyze, interpret, and draw conclusions based on the results of your computations.arrow_forwardFrom the given Statement of Financial Position and Income statement, solve for the following: 1) Compute the FINANCIAL ratios that measure: c) Operating Activity -Days Sales in Receivable -Days in Inventory d) Profitability -Earnings per Share -Return on Asset -Return on Equity -Operating Profit Margin -Net Profit Margin 2) Analyze, interpret, and draw conclusions based on the results of your computations.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License