Computing and Interpreting Financial Statement Ratios

Following are selected ratios of Colgate-Palmolive for 2015 and 2014.

Return on Assets(ROA) Component	2015	2014
Profitability (Net income/Sales)	8.50%	12.50%
Productivity (Sales/Average assets)	1.42	1.29

a. Was the company profitable in 2015? What evidence do you have of this?

No, Colgate-Palmolive was not profitable as evidenced by its decrease in its net profit margin.

Yes, Colgate-Palmolive was profitable as evidenced by its positive net profit margin.

Mark 1.00 out of 1.00

b. Is the change in productivity (asset turnover) a positive development?

No, the increase indicates more operating assets were needed to generate the same level of sales as the prior year.

Yes, the increase indicates that operating assets generated a higher level of sales than the prior year.

Mark 1.00 out of 1.00

c. Compute the company's ROA for 2015. Round answer to one decimal place (ex: 0.2345 = 23.5%). Answer

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