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Managerial Accounting

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 1MAD

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Evaluating Firm Profitability
The following financial information is taken from the annual reports of the Smith Company and the Wesson Company:
Smith
Wesson
Net income $10,000 $100,000
Net sales
50,000
400,000
Calculate the profit margin ratio for each company.
Note: Round answers to one decimal place, if necessary (ex: 15.4%).
Profit margin ratio
Smith
0 %
Wesson
0 %
Which company is more profitable?
Smith Company
Wesson Company
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