Learning Goals : By Completing This lecture, you should be able to know



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profitability and market
Lecture 2 Risk And Return - part 1 october 15 (3), lec 2
Gross Profit Margin =
= ( 3,074,000 - 2,088,000 ) ÷ 3,074,000
= 32.1 %
It was 30.1% last year , So Gross profit margin has been developed and increased in (2020 )
The More The better


  • The Operating Profit Margin (EBIT) Margin :

  • 3) Operating Profit Margin =
    or =
  • Analysts should be concerned if this ratio is too low.
  • Some analysts prefer to calculate the operating profit margin by adding back depreciation and any amortization expense to arrive at earnings before interest, taxes, depreciation, and amortization (EBITDA).

  • Assume that :

  • ( profit ) earning available to Common Stockholders (year 2020 ) =$ $221,000 Sales = $3,074,000 , COGS= $ 2,088, 000 , Operating Profit ( EBIT ) = $418,000
    So :
  • Operating Profit Margin = or =

  • = $418000÷ $3, 074,000= 13.6 %
    It was 11.8 % last year ( 2019 ) , So Operating Profit Margin for 2020 is better than 2019
    The More the better

  • The Earning per share :

  • 4) Earning Per Share =
    - High ratio indicated that more earning available For common stockholder
    Assume that
    Earning available for Common Stockholders = $ 221 , 000 , No, of Shares outstanding = 76,262
    So
    Earning Per Share =
    = $221,000 ÷ 76,262 = $ 2.90
    It indicates that each of outstanding share of common has earned $ 2.90 , The More The Better


  • Assume that :

  • Earning available for Common Stockholders = $ 221 , 000 , No, of Shares outstanding = 76,262 , Total assets = $ 3, 597, 000
    So return on assets (ROA) =

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