Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios,...

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Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Red Snail Satellite Company and make comments on its second-year performance as compared to its first-year performance. The following shows Red Snail Satellite's income statement for the last two years. The company had assets of $5,875 million in the first year and $9,398.00 million in the second year. Common equity was equal to $3,125 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Red Snail Satellite Company Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 3,175 2,500 1,610 1,495 159 100 1,769 1,406 Net Sales Operating costs except depreciation and amortization Depreciation and amortization Total Operating Costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (40%) Net Income 141 1,265 506 759 1,595 905 95 810 324 486 Calculate the profitability ratios of Red Snail Satellite Company in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Operating profit margin Net profit margin Return on total assets Return on common equity Basic earning power Year 2 Value Year 1 Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Red Snail Satellite Company and make comments on its second-year performance as compared to its first-year performance. The following shows Red Snail Satellite's income statement for the last two years. The company had assets of $5,875 million in the first year and $9,398.00 million in the second year. Common equity was equal to $3,125 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Red Snail Satellite Company Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 3,175 2,500 1,610 1,495 159 100 1,769 1,406 Net Sales Operating costs except depreciation and amortization Depreciation and amortization Total Operating Costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (40%) Net Income 141 1,265 506 759 1,595 905 95 810 324 486 Calculate the profitability ratios of Red Snail Satellite Company in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Operating profit margin Net profit margin Return on total assets Return on common equity Basic earning power Year 2 Value Year 1

Answer rating: 100% (QA)

To calculate the profitability ratios for Red Snail Satellite Company well use the following formulas 1 Operating profit margin Operating Income Net S... View the full answer