What is the meaning of each financial ratio? Dupont analysesTax effect0.830.93Interest expense effectOperating profit margin0.10Total asset turnover1.15Financial leverage3.04improve efficiency -> increase total asset turnoverimprove financial leverage -> borrow moreimprovereduce interest expenseslook at P/E to see it is a good investment or notif the companies have good financial ratios and not very high P/E -> good investment0.920.960.111.512.86-0.28-1.170.010.393.150.410.180.080.273.04

Introduction: A financial ratio is a statistic that is frequently provided by two numbers acquired…

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Business

Accounting

What is the meaning of each financial ratio?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

100%

What is the meaning of each financial ratio?

Dupont analyses
Tax effect
0.83
0.93
Interest expense effect
Operating profit margin
0.10
Total asset turnover
1.15
Financial leverage
3.04
improve efficiency -> increase total asset turnover
improve financial leverage -> borrow more
improve
reduce interest expenses
look at P/E to see it is a good investment or not
if the companies have good financial ratios and not very high P/E -> good investment
0.92
0.96
0.11
1.51
2.86
-0.28
-1.17
0.01
0.39
3.15
0.41
0.18
0.08
0.27
3.04

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