Calculate the profitability ratios of Petroxy Oil Co. in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Operating margin Profit margin Return on total assets Return on common equity Basic earning power Value Year 2 7.09% 3.55% V Y Year 1 -3.67% -1.02% -1.92% Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into both the survivability of a company and the benefits that shareholders receive. Identify which of the following statements are true about profitabilit ratios. Check all that apply.
Calculate the profitability ratios of Petroxy Oil Co. in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Operating margin Profit margin Return on total assets Return on common equity Basic earning power Value Year 2 7.09% 3.55% V Y Year 1 -3.67% -1.02% -1.92% Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into both the survivability of a company and the benefits that shareholders receive. Identify which of the following statements are true about profitabilit ratios. Check all that apply.
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
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:Calculate the profitability ratios of Petroxy Oil Co. in the following table. Convert all calculations to a percentage rounded to two decimal places.
Ratio
Operating margin
Profit margin
Return on total assets
Return on common equity
Basic earning power
Value
Year 2
7.09%
3.55%
▼
▼
Y
Year 1
-3.67%
-1.02%
-1.92%
Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into
both the survivability of a company and the benefits that shareholders receive. Identify which of the following statements are true about profitability
ratios. Check all that apply.
If a company has a profit margin of 10%, it means that the company earned a net income of $0.10 for each dollar of sales.
□ If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes.
An increase in a company's earnings means that the profit margin is increasing.
□ If a company issues new common shares but its net income does not increase, return on common equity will increase.
Transcribed Image Text:The following shows Petroxy Oil Co.'s income statement for the last two years. The company had assets of $3,525 million in the first year and $5,639
million in the second year. Common equity was equal to $1,875 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.
Petroxy Oil Co. Income Statement For the Year Ending on December 31 (Millions of dollars)
Year 2
Year 1
1,905
1,500
1,610
1,495
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 (25%)
Net Income
95
1,705
200
20
180
45
135
60
1,555
-55
-7
-48
-12
-36
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