Explain the difference between the way a profit margin ratio is constructed (and what margins measure) vs. the way a profitability ratio is constructed (and what these ratios measure).
Answer to relevant QuestionsWhy do financial analysts prefer NOPAT as a measure of profit, vs. more accounting based measures such as EBIT or net income? What is the appropriate discount rate to use when estimating a firm's intrinsic value using a dividend discount model? Explain why. Calculate UTX's current and quick ratios for each year 2010-2012. Calculate UTX's weighted average cost of capital (WACC) for 2012. Use a cost of debt of 5.0%, an effective tax rate of 24.76%, a risk-free rate of 1.723%, a beta of 1.0565 and a market risk premium of 7.0%. What do relative valuation ratios tell us about a company's stock?
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