You are analyzing the financial statements of XYZ Corp. for the year 2022. The following information is provided:

• Net sales: $500,000
• Cost of goods sold: $350,000
• Gross profit margin: 30%
• Operating expenses: $100,000
• Net income: $50,000
• Total assets: $600,000
• Total liabilities: $300,000
• Shareholders' equity: $300,000
• Return on assets (ROA): 8%
• Return on equity (ROE): 16%
• Debt-to-equity ratio: 0.5

a) Calculate the following financial ratios for XYZ Corp. for the year 2022:

i) Gross profit margin

ii) Operating profit margin

iii) Net profit margin

iv) Return on assets (ROA)

v) Return on equity (ROE)

vi) Debt-to-equity ratio

b) Interpret the calculated financial ratios and provide an overall analysis of the financial health of XYZ Corp.

c) Based on the financial ratios and other information provided, would you recommend investing in XYZ Corp.? Explain your reasoning.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a Calculation of financial ratios i Gross profit margin Net sales Cost of goods sold Net ... View the full answer