PROFITABILITY RATIOS

Question 1

Profit Margin for ROA

Answer 1

(NI+(1-TaxRate)(InterestExp) + Minority Interest in Earnings) / Sales

Same top as ROA

Question 2

Asset Turnover

Answer 2

Sales / Average Total Assets

Question 3

Return on Assets (ROA)

Answer 3

(NI+(1-TaxRate)(InterestExp) + Minority Interest in Earnings) / Average Total Assets

Same top profit margin for ROA

Question 4

Profit Margin for ROCE

Answer 4

(NI - Preferred Stock Dividends) / Sales

Same top as ROCE

Question 5

Capital Structure Leverage

Answer 5

(Average Total Assets) / Average Common Shareholders’ Equity

Question 6

Return on Common Shareholders’ Equity (ROCE)

Answer 6

(NI - Preferred Stock Dividends) / Average Common Shareholders’ Equity

Same Top as Profit Margin for ROCE

Question 7

COGS/Sales

Answer 7

COGS / Sales

Question 8

Accounts Receivable Turnover

Answer 8

Net Sales on Account / Average Accounts Receivable

Question 9

Inventory Turnover

Answer 9

Cost of Goods Sold / Average Inventories

Question 10

Fixed Assets Turnover

Answer 10

Sales / Average Fixed Assets