Chapter 17, Problem E17.22E

To determine

Concept Introduction

Profit Margin Ratio: Profit Margin Ratio is a financial profitability ratio that is used to compare a company’s net earnings and its net sales. It is calculated by dividing net income (or operating income) by net sales of a company for a particular period.

Return on Total Assets: Return on Total Assets (ROTA) is a financial profitability ratio that measures how effectively and efficiently a company utilizes its assets to generate profits during a period. It is calculated by dividing earnings before interest and tax (EBIT) by the average total assets for a particular period.

Asset Turnover Ratio: Asset Turnover Ratio is a financial efficiency ratio which is used to measure how efficiently a company is using its assets to generate sales. It is measured as the ratio of net sales to the average total assets of a company for a particular period.

Return on Common Stockholders’ Equity: Return on Common Stockholders’ Equity (ROCE) is a financial profitability ratio that measures the ability of a company to generate profits with the money invested by its shareholders. It is calculated by dividing net income available to common stockholders by average common stockholders’ equity for a particular period.

Earnings per Share: Earnings per Share (EPS) is a financial profitability ratio that measures the amount of net income available to common stockholders earned on one share. It is calculated by dividing net income available to common stockholders by the average (or weighted average) number of shares outstanding during a period.

Dividend Payout Ratio: Dividend Payout Ratio is a financial ratio that shows the percentage of a company’s earnings that is paid in the form of dividends. It is calculated by dividing dividend per share by earnings per share (EPS) for a particular period.

Requirement 1

To Compute:

The profit margin ratio for 2017 and 2016.

To determine

Requirement 2

To Compute:

The rate of return on total assets for 2017 and 2016.

To determine

Requirement 3

To Compute:

The asset turnover ratio for 2017 and 2016.

To determine

Requirement 4

To Compute:

The rate of return on common stockholders’ equity for 2017 and 2016.

To determine

Requirement 5

To Compute:

The earnings per share for 2017 and 2016.

To determine

Requirement 6

To Compute:

The 2017 dividend payout on common stock.

To determine

Requirement 7

Whether the company’s operating performance improved or deteriorated during 2017.