Analyze the following ratios. What does the NET PROFIT MARGIN RATIO tell about this company? Are...

Analyze the following ratios.

What does the NET PROFIT MARGIN RATIO tell about this company? Are the trends getting better or worse? Why or why not? Would you recommend purchase of this stock? Why or why not? Please explain your answers.

Net Profit	2016	2017	2018
Margin Ratio	10.91	8.97	8.71

What does the RETURN ON TOTAL ASSETS RATIO tell about this company? Are the trends getting better or worse? Why or why not? Would you recommend purchase of this stock? Why or why not? Please explain your answers.

Return Total	2016	2017	2018
Assets Ratio	6.75%	5.10%	5.06%

Expert Solution

Net profit ratio shows the profitability of company that is percentage of net pofit earned by company over its sales.

From the net profit ratio given for 3 years it can be seen that the margin ratio of company is decreasing from 10.91% in 2016 to 8.71% in 2018.

The decrease in margin ratio could be due to decrease in sales or increase in expenses of company which led to lower net profit earned by company.

The profitability of company is declining and so at this moment purchase of shares of company is not recommended.

Return on total assets ratio shows the percentage of net income earned by company on assets invested.

From the 3 years return on asset ratio given it can be seen that the return on asset ratio of company is declining from 6.75% in 2016 to 5.06% in 2018.

The decrease could be due to lower net income generated or increase in asset investment during 2017 and 2018.

The return on asset ratio of company is declining and so at this moment the purchase of shares of company is not recommended.

jeff jeffy answered 7 months ago

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Category Prior Year Current YearAccounts payable ??? ???Accounts receivable 320,715 397,400Accruals 40,500 33,750Additional paid in capital 500,000 541,650Cash 17,500 47,500Common Stock 94,000 105,000COGS 328,500 428,048.00Current portion long-term debt 33,750 35,000Depreciation expense 54,000 54,731.00Interest expense 40,500 41,017.00Inventories 279,000 288,000Long-term debt 339,670.00 401,877.00Net fixed assets 946,535 999,000Notes payable 148,500 162,000Operating expenses (excl. depr.) 126,000 161,905.00Retained earnings 306,000 342,000Sales 639,000 850,323.00Taxes 24,750 48,686.00What is the firm's current year net profit margin?

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