Profitability ratios as | 2013 | 2014 | 2015 | industry |
Profit margin = (net income /sales) | 4.50% | 5.40% | 4.00% | 4.51% |
Return on investment = (net income/total assets) | 6.10% | 7.40% | 5.80% | 5.10% |
DuPont = (net income/sales)x(sales/total assets) | 6.06% (0.045x4269871/3170200) | 7.20% (0.054x4483360/3360650 | 5.72% (0.040x5021643/3510110) | 6% (1.33x4.51) |
Return on equity = (net income/stockholder equity) | 16.04% {(193200/1204600)x100} | 18.55% {(243100/1310655)x100} | 15.02% {(200318/1333800)x100} | 9.80% |
Return on equity = (return on investment / (1- debt/asset)) |
16.05% 6.10/{1-(1965600/3170200)} |
18.97% 7.40 / {1-(2049995/3360650)} |
15.26% 5.80 / {1-(2176310/3510110)} |
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2 . We can clearly see that profitability margin , return on investment , DuPont, return on equity all these profitability ratio rose at a very high rate from 2013 to 2014 however in the year 2015 there was a sharp decline in all these profitability ratios that it not even fell below the ratios mentioned in 2014 but even fall below the level of year 2013. Reasons may be attributed to various causes like stuff competition faced from competitors emerged in the industry another reason may re the extraordinary losses put by the accountant to offset the extraordinary gain. Also the after effects of the event thst gave ride to extraordinary income may have hampered the earning capacity of the business
3. Profitability ratios calculated after adjustment :-
Profitability ratios | 2013 | 2014 | 2015 | industry |
Profit margin = (net income /sales) | 4.50% | 5.40% | 6.19% (310818/5021643) | 4.51% |
Return on investment (net income / total assets ) | 6.10% | 7.40% | 8.85% (310818/3510110) | 5.10% |
DuPont (net income/sales)x(sales/total asset) |
6.06% (0.045x4269871/3170200) |
7.20% (0.054x4483360/3360650) |
8.86% (0.0619x5021643/3510110) | 6% (1.33x4.51) |
Return on equity = (net income/stockholder equity) |
16.04% {(193200/1204600)x100} |
18.55% (243100/1310655x100) |
23.30% {(310818/1333800)x100} |
9.80% |
Return on equity = (return on investment / (1-debt/asset) |
16.05% 6.10/{1-(1965600/3170200)} |
18.97% 7.40/(1-{2049995/3360650} |
23.29% 8.85/(1-{2176310/3510110}) |
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4. Now after adjustment we can clearly seen that growth observed from year 2013 to 2014 is further extended to the year 2015. And we can see all profitability ratios further riding in year 2015.
5. Profitability margin of the company is 6.19% whereas profitability margin of industry is around 4.51% which shows we are able to gain more profitability and thus incurring lesser expense as compared to industry as a whole.
As far as Return on investment is concerned company has a return on investment of around 8.85% whereas industry average is around 5.10% which shows we are utilising out asset more effectively then industry as a whole also DuPont of the company is better than industrial average which again shows we are using our asset well.
Return on equity of the company is around 23.30% whereas industrial average is around 9.80% this company is generating double return for it's investor as compared to industry which also goes to show that company is better on trading in equity compared to industry.
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