An extract from an outdoor equipment company's 2021 financial statements follows: Income statement Year ended December 31, 2021 Year ended December 31, 2020 Sales 27,764 26,982 Net income 1,132 (322) What was the company's profitability ratio for 2021? O A. 13.7% OB. 8.8% O C. 4.08% O D. 7.9%
An extract from an outdoor equipment company's 2021 financial statements follows: Income statement Year ended December 31, 2021 Year ended December 31, 2020 Sales 27,764 26,982 Net income 1,132 (322) What was the company's profitability ratio for 2021? O A. 13.7% OB. 8.8% O C. 4.08% O D. 7.9%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![### Financial Statement Analysis
#### Example Question:
An extract from an outdoor equipment company’s 2021 financial statements follows:
**Income Statement**
**Year Ended December 31, 2021** and **Year Ended December 31, 2020**
- **Sales:**
- 2021: 27,764
- 2020: 26,982
- **Net Income:**
- 2021: 1,132
- 2020: (322)
**Question:**
What was the company's profitability ratio for 2021?
Choose the correct answer:
- A. 13.7%
- B. 8.8%
- C. 4.08%
- D. 7.9%
**Explanation:**
To determine the profitability ratio, we look at the net income as a percentage of sales. The formula for the profitability ratio is:
\[ \text{Profitability Ratio} = \left( \frac{\text{Net Income}}{\text{Sales}} \right) \times 100 \]
For 2021:
\[ \text{Profitability Ratio} = \left( \frac{1132}{27764} \right) \times 100 \approx 4.08\% \]
Hence, the correct answer is:
- C. 4.08%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc661af3a-7936-45bf-a3ab-95afaaacb5fc%2Ff521635d-7cfe-4b01-b136-0ffc8417fdd1%2Fi4nc1dj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Financial Statement Analysis
#### Example Question:
An extract from an outdoor equipment company’s 2021 financial statements follows:
**Income Statement**
**Year Ended December 31, 2021** and **Year Ended December 31, 2020**
- **Sales:**
- 2021: 27,764
- 2020: 26,982
- **Net Income:**
- 2021: 1,132
- 2020: (322)
**Question:**
What was the company's profitability ratio for 2021?
Choose the correct answer:
- A. 13.7%
- B. 8.8%
- C. 4.08%
- D. 7.9%
**Explanation:**
To determine the profitability ratio, we look at the net income as a percentage of sales. The formula for the profitability ratio is:
\[ \text{Profitability Ratio} = \left( \frac{\text{Net Income}}{\text{Sales}} \right) \times 100 \]
For 2021:
\[ \text{Profitability Ratio} = \left( \frac{1132}{27764} \right) \times 100 \approx 4.08\% \]
Hence, the correct answer is:
- C. 4.08%
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