Ratios_and_profit_margin

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Ratios

Ratios provide the users of financial statements with a great deal of information about the entity. Do ratios tell the whole story? How could liquidity ratios be used by investors to determine whether or not to invest in a company?

Guided Response:
Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.


Profit Margin


Year Ending December 2012
Year Ending December 2011
Year Ending December 2010

Revenues
40,000
35,000
33,000

Operating Expenses




Salaries
15,000
10,000
9,000

Maintenance and Repairs
6,000
9,000
10,000

Rental Expense
2,500
2,500
2,500

Depreciation
2,000
2,000
2,000

Fuel
4,000
3,500
2,500

Total Operating Expenses
29,500
27,000
26,000

Operating Income
10,500
8,000
7,000

Sales and Administrative Expenses
6,000
4,000
3,000

Interest Expense
2,500
2,000
1,000

Net Income
2,000
2,000
3,000


Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012. Calculate the profit margin for each of these years. Comment on the profit margin trend.