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Kane, PA 16735


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Phone( (814) 837-9150

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Ratio Analysis
Analysis of Profitability Ratios
  General Explanation

The owners of the company are primarily interested in the rate of return on equity invested in the company versus alternative investments. The rate of return is affected not only by the amount of net income but is also a result of the amount of leverage or borrowing a company has used.

  Profitability Ratios  

Gross margin %

The gross margin percentage reflects the relationship of gross margin to sales as a percentage.

Operating income %

The operating income percentage reflects the percentage of net income to sales as a percentage.

Net income %

The net income percentage reflects the relationship of net income to sales as a percentage.

Return on assets

he expression of net income to total assets provides a basic measure of profit performance which can be used for comparisons of operating results from year to year for the same company or comparisons of results of different companies.

Return on stockholder's equity

The rate of return on the stockholder's investment in the company provides a common measurement for comparison of rates of return on alternative investments of equity capital.
Return on long-term debt & stockholder's equity A comparison of net income to the sum of stockholder's equity and long-term debt provides a rate of return percentage on the total invested capital of the company from creditors and stockholders.

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