Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Petroxy Oll Co. and make comments on its second-year performance as compared with Its first-year performance. The following shows Petroxy Oll Co.'s Income statement for the last two years. The company had assets of $9,400 million in the first year and $15,037 million in the second year. Common equity was equal to $5,000 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Petroxy Oil Co. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net Sales 5,080 Operating costs except depreciation and amortization 1,365 Depreciation and amortization 254 Total Operating Costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (25%) Net Income Ratio Operating margin Profit margin Return on total assets Return on common equity Basic earning power Calculate the profitability ratios of Petroxy Oll Co. In the following table. Convert all calculations to a percentage rounded to two decimal places. Value Year 2 44.19% 23.02% Year 1 64.30% 4,000 1,268 160 18.36% 34.52% 1,619 3,461 467 2,994 2,302 749 576 2,245 1,726 1,428 2,572 270
Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Petroxy Oll Co. and make comments on its second-year performance as compared with Its first-year performance. The following shows Petroxy Oll Co.'s Income statement for the last two years. The company had assets of $9,400 million in the first year and $15,037 million in the second year. Common equity was equal to $5,000 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Petroxy Oil Co. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net Sales 5,080 Operating costs except depreciation and amortization 1,365 Depreciation and amortization 254 Total Operating Costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (25%) Net Income Ratio Operating margin Profit margin Return on total assets Return on common equity Basic earning power Calculate the profitability ratios of Petroxy Oll Co. In the following table. Convert all calculations to a percentage rounded to two decimal places. Value Year 2 44.19% 23.02% Year 1 64.30% 4,000 1,268 160 18.36% 34.52% 1,619 3,461 467 2,994 2,302 749 576 2,245 1,726 1,428 2,572 270
Financial Accounting Intro Concepts Meth/Uses
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ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter7: Introduction To Financial Statement Analysis
Section: Chapter Questions
Problem 14E
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Transcribed Image Text:Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the
operating performance of a firm.
Your boss has asked you to calculate the profitability ratios of Petroxy Oil Co. and make comments on its second-year performance as compared with
its first-year performance.
The following shows Petroxy Oll Co.'s Income statement for the last two years. The company had assets of $9,400 million in the first year and $15,037
million in the second year. Common equity was equal to $5,000 million in the first year, and the company distributed 100% of its earnings out as
dividends during the first and the second years. In addition, the firm did not issue new stock during either year.
Petroxy Oil Co. Income Statement For the Year Ending on December 31 (Millions of dollars)
Year 2 Year 1
4,000
1,268
Net Sales
Operating costs except depreciation and amortization
Depreciation and amortization
Total Operating Costs
Operating Income (or EBIT)
Less: Interest
Earnings before taxes (EBT)
Less: Taxes (25%)
Net Income
Ratio
Operating margin
Profit margin
Return on total assets
Return on common equity
Basic earning power
Calculate the profitability ratios of Petroxy Oll Co. In the following table. Convert all calculations to a percentage rounded to two decimal places.
Value
Year 2
44.19%
23.02%
Year 1
64.30%
5,080
1,365
254
1,619
3,461
467
2,994
749
2,245
18.36%
34.52%
160
1,428
2,572
270
2,302
576
1,726
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