Analysis of financial Statement

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Profitability

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Profitability measures
The following items should be excluded: 1. Discontinued operations 2. Extraordinary items

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Gross Profit Margin GPM = Gross Profit Net Sales

Operating profit Margin OPM = Operating Income Net Sales

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Total Assets Turnover TAT = Net Sales Average Total Assets

Fixed Assets Turnover

FAT =

Net Sales Average Fixed Assets desk of Baber Saleem (Excluding From the

Return on Capital employed ROCE = Net Profit Average Equity

Return on Investment ROI = Net Profit + (Interest expense X (1-tax rate)) Average (Long term loan + From the desk of Baber Saleem Equity)

Concept of Margin and Markup

Margin Sales amounts are important as it includes profit. Markup COGS is important as Sales do not includes profit amount.

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Practice Question 1
ABC Enterprise lists the following data for 2007 and 2006: 2007 2006 Net income 52,500 40,000 Net sales 1,050,000 1,000,000 Average total assets 230,000 200,000 Average common equity 170,000 From the desk of Baber Saleem 160,000

Practice Question 2

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Practice Question 3

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Gross Profit Margin

GPM = Gross Profit Net Sales

Operating profit

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Practice Question 4
AGG Company recently had a fire in its store. Management must determine the inventory loss for the insurance company. Since the firm did not have perpetual inventory records, the insurance company has suggested that it might accept an estimate using the gross profit test. The beginning inventory, as determined from the last financial statements, was $10,000. Purchase invoices indicate purchases of $100,000. From the desk of Baber Saleem

Earning Per Share

Khas corporation had 10,000 shares of common stock outstanding at the beginning of the year. On July 1, it issued 2,000 shares, and on October 1, it issued another 3,000 shares. Year end is December and by year end Khas earned Rs 55,000 as profit.

What is EPS for the year for Khas corporation

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Other earning ratios

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