Chapter 8 Outline - Chapter 8 Profitability Net income for...

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Chapter 8 Profitability Net income for most of these ratios does not include: Minority share of income because it does not relate to the company’s income Equity earnings because they do not result in cash and are not part of the company’s income Non recurring items because they are not from normal operatings Net Profit Margin Net Income Net Sales Indicates how profitable a company is and is a function of: 1. Sales mix 2. Pricing 3. Cost control 4. Etc. Total Asset Turnover Net Sales Avg. Total Assets Indicates the ability to generate sales through asset use Consider non operating assets 1. Investments 2. Construction in progress Return on Assets Net Income Avg. Total Assets
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Dupont Return on Assets Net Profit Margin percent X Total Asset Turnover A company with a good profit margin Which turns their assets often over the year Will result in a better Dupont return Another way to look at this ratio is
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  • Spring '10
  • Blanco
  • Generally Accepted Accounting Principles, Net Income Avg

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