Luna - Possible reasons: Fixed asset turnover and return on...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Possible reasons: Fixed asset turnover and return on assets have dropped, so either net sales have dropped, or PPE has increased. If PPE has increased, this will mean depreciation will increase, thereby decreasing profit. Fixed charge coverage has fallen, which means that lease payments and interest expense have increased, which would also lead to decreased profit. Operating profit margin has dropped even though gross profit margin has remained constant. This shows the problem is not with COGS. The Op'g profit margin could have dropped because of higher depreciation, as mentioned above, as well as other operating expenses . Net profit margin has also dropped, pointing to higher interest and taxes and other expenses not covered in operating margin To access the profitability of an organization profitability ratios are of a prime importance. Profitability ratios help us to measure organizations ability to generate earnings /profit for a given period of time. The most important Profitability ratios include
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/24/2011 for the course ACC 220 ACC 220 taught by Professor Black during the Spring '11 term at University of Phoenix.

Page1 / 2

Luna - Possible reasons: Fixed asset turnover and return on...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online