To arrive at an estimate of the net profit margin, why would you spend time estimating the operating profit margin and work down?
Answer to relevant QuestionsYou are convinced that capacity utilization next year will decline from 82 percent to about 79 percent. Explain what effect that only this change will have on the operating profit margin.You are told that nominal GDP will increase by about 10 percent next year. Using Exhibit and the regression equation, what increase would you expect in corporate sales?Briefly describe the results of the studies that examined industry performance over time. Do these results complicate or simplify industry analysis?List the three variables that are relevant when attempting to determine whether the earnings multiple (P/E ratio) for an industry should be higher, equal to, or lower than the market multiple.Why has the price/cash flow ratio become a popular measure of relative value during the recent past? What factors would help explain a difference in this ratio for two firms?
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