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. O 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. O If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. O An increase in the return on assets ratio implies an increase in the assets a firm owns. O If a company issues new common shares but its net income does not increase, return on common equity will increase.
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. O 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. O If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. O An increase in the return on assets ratio implies an increase in the assets a firm owns. O If a company issues new common shares but its net income does not increase, return on common equity will increase.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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.
O 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.
O If a company's operating margin increases but its profit margin decreases, it could mean that the
company paid more in interest or taxes.
O An increase in the return on assets ratio implies an increase in the assets a firm owns.
O If a company issues new common shares but its net income does not increase, return on common
equity will increase.
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