Gross Profit Margin

Sales
Cost of Goods Sold

23,949.00
22,562.00
5.8%

The gross profit margin is:

Operating Profit Margin
Operating profit
Sales

1,009.00
23,949.00
4.2%

The operating profit margin is:

Net Profit Margin
Net Profits After Taxes
Sales

716.00
23,949.00
3.0%

The net profit margin is:

Return on Assets (ROA)
Net Profits After Taxes
Total Assets

716.00
16,540.00
4.3%

The return on assets is:

Return on Equity (ROE)
Net Profits After Taxes
Stockholders' Equity

716.00
6,005.00
11.9%

The return on equity is:

Earnings Per Share (EPS)
Earnings Available to Common Stockholders'
Common Shares Outstanding

716.00
269.93
$0.38

The earnings per share are:

Copyright, 2006, Jaxworks, All Rights Reserved.

Liquidity Analysis and Ratios

XYZ Corporation
For Period Ending 12/31/2013

NET WORKING CAPITAL

Current Assets
Current Liabilities
The net working capital is:
CURRENT RATIO
Current Assets
Current Liabilities

4,369.00
6,765.00

2,396.00

4,369.00
6,765.00

The current ratio is:

0.65

QUICK RATIO
Current Assets
Inventory
Current Liabilities

The quick ratio is:

Prepared by:

4,369.00
1,005.00
6,765.00
0.50

Prepared on:

Copyright, 2014, Jaxworks, All Rights Reserved.

Copyright, 2010, Jaxworks, All Rights Reserved.

Current Ratio
The current ratio compares a company's current assets (those that can be converted to cash during the
current accounting period) to its current liabilities (those liabilities coming due during the same period).
The usual formula is:
Current Ratio = Current Assets / Current Liabilities
The current ratio measures the company's ability to repay the principal amounts of its liabilities.
The current ratio is closely related to the concept of working capital. Working capital is the difference
between current assets and current liabilities.
Is a high current ratio good or bad? Certainly, from the creditor's standpoint, a high current ratio means
that the company is well-placed to pay back its loans. Consider, though, the nature of the current assets:
they consist mainly of cash and cash equivalents. Funds invested in these types of assets do not
contribute strongly and actively to the creation of income. Therefore, from the standpoint of stockholders
and management, a current ratio that is very high means that the company's assets are not being used
to best advantage.

Copyright, 2003, JaxWorks, All Rights Reserved.

Leverage Ratios
Debt ratio
Total Liabilities
Total Assets
Debt ratio

2014
10,535.00
16,540.00
0.64

Debt Ratio
The debt ratio is defined by this formula:
Debt ratio = Total debt / Total assets
It is a healthy sign when a company's debt ratio is falls, although both stockholders and potential
creditors would prefer to see the rate of decline in the debt ratio more closely match the decline in return
on assets. As the return on assets falls, the net income available to make payments on debt also falls.
This company should probably take action to retire some of its short-term debt, and the current portion of
its long-term debt, as soon as possible.

Copyright, 2003, JaxWorks, All Rights Reserved.

Profitability Ratios
Return on Assets
EBITDA
Total assets
Return on assets

Full Year
$943
$16,540
5.7%

Return on Assets
One of management's most important responsibilities is to bring about a profit by effective use of the
resources it has at hand. One ratio that speaks to this question is return on assets. There are several
ways to measure this return; one useful method is:
Return on Assets = (Gross Profit - Operating Expense) / Total Assets
This formula will return the percentage earnings for a company in terms of its total assets. The better the
job that management does in managing its assets-the resources available to it-to bring about profits, the
greater this percentage will be.
It's normal to calculate the return on total assets on an annual basis, rather than on a quarterly basis.

Copyright, 2003, JaxWorks, All Rights Reserved.

Profitability Ratios

Gross Profit Margin

The gross profit margin is a basic ratio that measures the added value that the market places on a
company's non-manufacturing activities. Its formula is:
Gross profit margin = (Sales - Cost of Goods Sold) / Sales
The cost of goods sold is, clearly, an important component of the gross profit margin. It is usually
calculated as the sum of the cost of materials the company purchases plus any labor involved in the
manufacture of finished goods, plus associated overhead.
The gross profit margin depends heavily on the type of business in which a company is engaged. A
service business, such as a financial services institution or a laundry, typically has little or no cost of
goods sold. A manufacturing, wholesaling, or retailing company typically has a large cost of goods sold,
with a gross profit margin that varies from 20 percent to 40 percent.
The gross profit margin measures the amount that customers are willing to pay for a company's product,
over and above the company's cost for that product. As mentioned previously, this is the value that the
company adds to that of the products it obtains from its suppliers. This margin can depend on the
attractiveness of additional services, such as warranties, that the company provides. The gross profit
margin also depends heavily on the ability of the sales force to persuade its customers of the value
added by the company.
This added value is, of course, created by other costs such as operating expenses. In turn, these costs
must be met largely by the gross profit on sales. If customers do not place sufficient value on whatever
the company adds to its products, there will not be enough gross profit to pay for the associated costs.
Therefore, the calculation of the gross profit margin helps to highlight the effectiveness of the company's
sales strategies and sales management.

Copyright, 2003, JaxWorks, All Rights Reserved.

Profitability Ratios

Earnings Per Share (EPS)

Depending on your financial objectives, you might consider investing in a company to obtain a steady
return on your investment in the form of regular dividend payments, or to obtain a profit by owning the
stock as the market value of its shares increases. These two objectives might both be met, but in
practice they often are not. Companies frequently face a choice of distributing income in the form of
dividends, or retaining that income to invest in research, new products, and expanded operations. The
hope, of course, is that the retention of income to invest in the company will subsequently increase its
income, thus making the company more profitable and increasing the market value of its stock.
In either case, Earnings Per Share (EPS) is an important measure of the company's income. Its basic
formula is:
EPS = Income Available for Common Stock / Shares of Common Stock Outstanding
EPS is usually a poor candidate for vertical analysis, because different companies always have different
numbers of shares of stock outstanding. It may be a good candidate for horizontal analysis, if you have
access both to information about the company's income and shares outstanding. With both these items,
you can control for major fluctuations over time in shares outstanding. This sort of control is important: it
is not unusual for a company to purchase its own stock on the open market to reduce the number of
outstanding shares. So doing increases the value of the EPS ratio, perhaps making the stock appear a
more attractive investment.
Note that the EPS can decline steadily throughout the year. Because, the number of shares outstanding
is constant throughout the year, the EPS changes are due solely to changes in net income.
Many companies issue at least two different kinds of stock: common and preferred. Preferred stock is
issued under different conditions than common stock. Preferred stock is often callable at the company's
discretion, it pays dividends at a different (usually, higher) rate per share, it might not carry voting
privileges, and often has a higher priority than common stock as to the distribution of liquidated assets if
the company goes out of business.
Calculating EPS for a company that has issued preferred stock introduces a slight complication.
Because the company pays dividends on preferred stock before any distribution to shareholders of
common stock, it is necessary to subtract these dividends from net income:
EPS (Net Income - Preferred Dividends) / Shares of Common Stock Outstanding

Copyright, 2003, JaxWorks, All Rights Reserved.