Asked by Michael Culham on Jun 14, 2024
Verified
Packers Corporation reported the following data for the year ended December 31,2019:
Calculate each of the following ratios:
A.Net profit margin
B.Return on assets
C.Return on equity
D.Earnings per share
E.Price/earnings ratio
F.Debt-to-equity ratio
G.Fixed asset turnover ratio
Net Profit Margin
A financial ratio representing the percentage of net income to sales revenue, indicating how much of each dollar earned by the company is translated into profits.
Return on Assets
A ratio indicating how efficiently a company is using its assets to generate profit, calculated as net income divided by total assets.
Earnings Per Share
A metric that divides a company's profit available to its common stockholders by the average outstanding shares.
- Analyze the financial health of corporations by examining ratios related to profitability, liquidity, and solvency.
- Assess and distinguish the fiscal well-being of corporations in a similar sector via thorough ratio examination.
Verified Answer
B.Return on assets = $25,000 ÷ $200,000 = 12.5%.
C.Return on equity = $25,000 ÷ $160,000 = 15.6%.
D.Earnings per share = $25,000 ÷ 10,000 shares = $2.50.
E.Price/earnings ratio = $16 ÷ $2.50 = 6.4.
F.Debt-to-equity ratio = ($200,000 - $160,000)÷ $160,000 = 25%.
G.Fixed asset turnover ratio = $400,000 ÷ $100,000 = 4 times.
Learning Objectives
- Analyze the financial health of corporations by examining ratios related to profitability, liquidity, and solvency.
- Assess and distinguish the fiscal well-being of corporations in a similar sector via thorough ratio examination.
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