Heyy, I really need help understanding this question, I have attempted it and my answers are always
Question:
Heyy, I really need help understanding this question, I have attempted it and my answers are always different to the ones in the answer key. Please help
2015 2016
Sales 51,000 55,625
Purchases of raw materials
13,500 12,750
Expenses in personnel
10,000 13,200
Financial Expenses
7,000 14,000
Positive result 20,500 15,675
This company has had the same total net assets during the years of 2015 and 2016 (200,000 Euros), financed with equity capital. These equities have had a cost of 10% in both years; therefore, we'd like to know:
a) Economic profitability. Interpret the results.
b) The sales margin and asset turnover. Interpret the results.
c) Financial Profitability. Interpret the results.
d) Type of leverage in both periods.
e) Please explain the differences between the Economic profitability and Financial Profitability in both periods.
f) Do you think it would be good for the company to increase its debt levels for the upcoming year 2017? Support your explanation based on the concept of leverage.