Beruflich Dokumente
Kultur Dokumente
Profitability
http://iiqtisad.blogspot.com/
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
Profitability Measures
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #2
Net Profit Margin
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #3
Net Profit Margin
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/
http://iiqtisad.blogspot.com/ Chapter 8, Slide #4
Total Asset Turnover
Net Sales
Average Total Assets
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 8, Slide #5
Return on Assets
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #6
DuPont Return on Assets
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #7
DuPont Return on Assets (cont’d)
FIRM B
Year 1 10% = 4.0% × 2.5
Year 2 8% = 3.2% × 2.5
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #9
Operating Income Margin
Operating Income
Net Sales
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #10
Operating Asset Turnover
Net Sales
Average Operating Assets
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #11
Return on Operating Assets
Operating Income
Average Operating Assets
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #12
Sales to Fixed Assets
Net Sales
Average Net Fixed Assets
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #13
Return on Investment (ROI)
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #14
Return on Investment (ROI) (cont’d)
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #15
Return on Total Equity
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #16
Return on Common Equity
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #17
The Relationship Between Profitability
Ratios
Measures
Rate of return to
return on providers of Typical result
Assets All funds Lowest (includes all assets)
Investment Long-term funds Higher than ROA (relative small
amount of short-term funds)
Total equity Equity Higher than ROI (measures return only
to shareholders)
Common equity Common equity Highest
• Common shareholders absorb
greatest degree of risk
• Requires that return to preferred
shareholders exceed funds paid to
preferred shareholders
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part. http://iiqtisad.blogspot.com/ Chapter 8, Slide #18
Gross Profit Margin
Gross Profit
Net Sales
Sales
Beginning Inventory
– Cost of Goods Sold + Purchases of Inventory
– Ending Inventory
= Gross Profit
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #19
Gross Profit Margin Analysis
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #20
Segment Reporting
• Operating segments
– Separate financial information is available
– Evaluated by the chief decision making officer
• Geographical information
– Revenues earned
– Asset concentration
• Major customers
• Products and services
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #21
Gains and Losses from Prior Period
Adjustments
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #22
Comprehensive Income
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #23
Comprehensive Income (cont’d)
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #25
Interim Reports
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #26
Net Profit Margin
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
http://iiqtisad.blogspot.com/ Chapter 8, Slide #27