XYZ Corp has provided you with the following information for the year ending December 31, 2022:

• Sales revenue: $500,000
• Cost of goods sold: $300,000
• Operating expenses: $100,000
• Income tax expense: $10,000
• Interest expense: $5,000
• Average total assets: $400,000
• Average total liabilities: $200,000
• Average number of outstanding shares: 50,000
• Market price per share: $10.00

a) Calculate the following ratios:

• Gross profit margin
• Operating profit margin
• Net profit margin
• Return on assets (ROA)
• Return on equity (ROE)
• Debt-to-equity ratio
• Earnings per share (EPS)
• Price-to-earnings (P/E) ratio

b) Interpret the ratios calculated in (a) and provide insights into the financial health of XYZ Corp.

c) Based on the financial ratios and other information provided, would you recommend investing in XYZ Corp? Why or why not?

Answer rating: 100% (QA)

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