Business Administration Program
I. Identification. Below is a table summarizing the different tools to Test Profitability and Returns to Investors.. Fill in the missing information. Write your answer in the space provided for.
Name| Formula| Significance|
Gross Profit Margin| 1.| Measures the profit generated after consideration of the cost of product sold.| 2.| Operating ProfitNet Sales| Measures profit generated after consideration of operating cost.| 3.| Net ProfitNet Sales| Measures profit generated after consideration of all expenses and revenues| Cash Flow Margin| 4.| Measures the ability of the firm to translate sales to cash| Rate of Return on Assets| 5.| 6.|
Rate of Return on Equity| 7.| 8.|
9.| Net Income – Preferred DividendsWeighted Ave. # of Common Shares| 10.| 11.| Price per Share Earnings per Share| 12.| 13.| Dividend per SharePrice per Share| Measures the rate of return in the investors common stock investment| Dividend Pay-out| 14.| 15.|
II. True or False. Write A if the answer is True. If your answer is false, underline the word that makes the statement incorrect and write the correct word. Place your answer before the number
1. Horizontal Analysis involves camparing figures reported in the Financial Statements of two or more consecutive accounting period 2. The base period for calculating percentage changes when conducting horizontal analysis is the recent period 3. Vertical analysis involves comparing figures in the financial statement of a single period 4. In preparing the common size financial statement, income statement items are expressed as a percentage of total assets 5. Short term creditors are more interested in the ratios indicating the profitability of the firm 6. Long term creditors are more interested in the firm’s liquidity than solvency 7. Return on sales is one...