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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Students have asked these similar questions
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
Preparing common-size income statement
Data for Connor Inc and Alto Corp follow:
Requirements
Prepare common-size income statements.
Which company earns more net income?
Which company’s net income is a higher percentage or its net sales revenue?
1. Compute the average P/E ratio of the industry. Include the ratio of all companies in the computation of industry average.
2. Assuming that Northrop's earnings is P11.50 per share, compute for the company's relative value based on the industry average P/E ratio. *
3. Assume that Grumman is the subject company and all others are comparable companies. How much must be its relative value based on the median P/BV ratio of comparable companies if its book value per share is P62? The ratio of the subject company must not be included in computing the median ratio of comparable companies. *
4. Using the the industry averages of the three ratios, would you buy Loral at its current price? (Explanation should be on the handwritten solution) *
Yes
No
Chapter 5 Solutions
FINANCIAL ACCOUNTING
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