ng.cengage.com/stati cengage.com/static/nb/ui/index.html?nbld-3517928nbNodeld-11

Question

ng.cengage.com/stati cengage.com/static/nb/ui/index.html?nbld-3517928nbNodeld-1172770308deploymentld-4738029766068172016 MindTap Assignment 04 Analysis of Financial Statements 9 Due Today at 11 FM CST Sixty-Second Avenue Inc. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 3,175 2,500 1,610 1,495 100 1,769 1,595 905 118 Net Sales Operating costs except depreciation and amortization 159 Total Operating Costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (40%) Net Income 1,406 141 787 | 1,265 506 315 472 759 Calculate the profitability ratios of Sixty-Second Avenue Inc, in the following table. Convert all calculations to a percentage rounded to two decimal places Ratio Value Year 2 Year 1 36.209% Operating margin Profit margin 23.91%

Explanation / Answer

Part 1: There are 5 ratios to be calculated.

The first ratio are calculated as follows:

For the last three ratios we need the total Assets and common equity value which can be found in the balance sheet of the firm.

Part 2

For this part there are two answers

A) A higher opertaing margin and lower profit margin means that the operating cost of the company is lower hence it has a higher margin. But the profit margin can be lower due to other non operating expenses. This might also occur if the company has a higher pricing of the products than the industry.

C) The company might see a rise in operating margin and drop in profit margin due to additional Tax and interest expenses.

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.