FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781618533111
Author: DYCKMAN
Publisher: Cambridge Business Publishers
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Question
Chapter 5, Problem 45P
a.
To determine
Calculate Profit Margin and Gross profit margin for each of the company.
b.
To determine
Calculate Research and development to sales ratio and selling, general and administrative to sales ratio for each of the company.
c.
To determine
Compare the relative profitability of the companies.
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Compare the two companies based on their ratios. Use the last column in the template to detail how each company is doing in relation to the ratios. Explain the significance of how the company ratios compare to each other.
RATIOS
Ford Motor Co
General Motors Co
ANALYSIS
Profitability Ratios (%)
Gross Margin
15.01
17.9
EBITDA Margin
8.66
15.55
Operating Margin
2
3
Pre-Tax Margin
2.71
5.81
Effective Tax Rate
14.96
5.54
Financial Strength
Quick Ratio
1.04
0.73
Current Ratio
1.2
0.92
LT Debt to Equity
2.8
1.88
Total Debt to Equity
7.14
5.85
Interest Coverage
4.54
14.05
Valuation Ratios
Price/Earnings Ratio
4.9
35.6
Price to Sales P/S
0.2
2.2
Price to Book P/B
0.9
1.2
Free Cash Flow per Share
2.26
-6.95
Management Effectiveness (%)
Return On Assets
1.43
3.6
Return On Investment
2.18
6.02
Return On Equity
10.38
21.43
Efficiency
Receivable Turnover
2.5
4.74…
DuPont system of analysis Use the following financial information for AT&T and Verizon to
conduct a DuPont system of analysis for each company.
Sales
Earnings available for common stockholders
Total assets
Stockholders' equity
a. Which company has the higher net profit margin? Higher asset turnover?
b. Which company has the higher ROA? The higher ROE?
c. Which company has the higher financial leverage multiplier?
a. Net profit margin (Round to three decimal places.)
AT&T
Net profit margin
AT&T
$164,000
13,333
403,921
201,934
Verizon
Verizon
$126,280
13,608
244,280
24,232
CALCULATE PER
Chapter 5 Solutions
FINANCIAL ACCOUNTING
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