594 Chapter 13 Analying and Inerprecing Financial Seatement nterest espense mean

Question

594 Chapter 13 Analying and Inerprecing Financial Seatement nterest espense means this ratio is not meaningful to Apple because of zero insee the same is true for Google. This means their creditors have little risk of nonrepa Times interest earned Geagle Samsung-48 $41,733 $0+514,030 so Decision Insight market. The phrase comes from bearskin jobbers who market. This Bears and Bulls A bear market is a deolining often sold the skins before the bears were caught. The term bear was then who sold shares they did not own in anticipation of a price decline buil market is a rising phrase comes from the once popuiar sport of bear and bull baiting The term bul came to mean the oppo Profitability efficiently to produce profits We are especially interested in a company's ability to use its assets (and positive cash flows). Profitabiliry refers turn on invested capital. Return is judged by assessing earnings re of financing. Profitability is also relevant to solvency. This section describes measures and their importance to financial statement analysis. to a company's ability to generate an adequate re- and sources level Profit M argin A company's operating efficiency and profitability can be expressed by two components. The first is profit margin, which reflects a company's ability to carn from sales (Chapter 3 offers additional explanation). It is measured by expressing net a percent of sales (sales and revenues are similar terms). Apple's profit margin follows. Profit margin Google-21.4% Samsung-11.9% Industry-11% Net income $41,733 Profit margin Net sales $156.508 , 26.7% To evaluate profit margin, we must consider the industry. For instance, an appliance company might require a profit margin between 10% and 15%, whereas a retail supermarket might require a profit margin of 1% or 2%. Both profit margin and total asset turnover make up the two basic components of operating efficiency. These ratios reflect on management because managers are ultimately responsible for operating efficiency. The next section explains how we use both measures to analyze return on total assets. Return on Total Assets Return on total assets is defined as follows Net income Average total assets Return on total assets- Apple's 2012 return on total assets is Return on total assets Google-12.9% Samsung-142% ndustry ~ 9% $41,733 (S116.371 + $176,064)/ 28.5% Apple's 28.5% return on total assets is higher than that for many businesses and oint: Mary analysts add back itees pritir x (1-a rtr) to ner income computing return on sotal assecs Goog i 's129%, Samsung's l 42%, and the industry's 9% return. We also should evaluate any trend in the rate of return.

Explanation / Answer

Profit Margin ratio of Apple for 2012 is 26.7%.

The profit margin ratio compares the earnings reported by a business to its sales. It is the most important measure of the financial health of an organization. It represents the proportion of sales that is left over after all relevant expenses have been adjusted. As the Profit Margin for Google is 21.4%, Samsung 11.9% and Industry 11%, it shows that Apple is the most profitable company with Profit Margin at 26.7% and Samsung the lease with 11.9% profit margin.

(For dividend yeild and PE ratio please upload Page 596 as well)

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