Profit margin ratio: Profit margin ratio shows proportion of net income in terms of sales. Earning capability is measured by this ratio. Gross profit ratio: Gross profit ratio is the ratio of gross margin expressed in form of percentage of sales. This ratio shows the profit earned by the company after paying off cost of sold goods. Return on total assets ratio : Company’s earnings made through its net assets is known as return on total assets ratio. Return on common stockholder’s equity : Return on common stockholder’s equity displays returns received on stockholder’s equity for a certain period of time. Earnings per share: Earnings per share show the profit allocated to per share of common stock of the company. To compute: 1.Profit margin ratio 2.Gross profit ratio 3.Return on total assets 4. Return on common stockholder’s equity 5.Basic net income per common share of H Company.

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Chapter 13, Problem 3BTN

To determine

Profit margin ratio:

Profit margin ratio shows proportion of net income in terms of sales. Earning capability is measured by this ratio.

Gross profit ratio:

Gross profit ratio is the ratio of gross margin expressed in form of percentage of sales. This ratio shows the profit earned by the company after paying off cost of sold goods.

Return on total assets ratio:

Company’s earnings made through its net assets is known as return on total assets ratio.

Return on common stockholder’s equity:

Return on common stockholder’s equity displays returns received on stockholder’s equity for a certain period of time.

Earnings per share:

Earnings per share show the profit allocated to per share of common stock of the company.

To compute: 1.Profit margin ratio 2.Gross profit ratio 3.Return on total assets 4. Return on common stockholder’s equity 5.Basic net income per common share of H Company.

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