TMP 120 Lecture Notes - Lecture 11: Asset
Document Summary
Profitability ratios (margin ratios) & insights: gross profit margin = sales cost of sales. Shows the proportion of money left over from revenues after accounting for cogs. Sales: operating profit margin = income from operations. Measures a firm"s pricing strategy and operating efficiency. Company can"t control demand but can control its expenses. Sales: pretax profit margin = income before income taxes. Company earnings before tax as a percentage of revenues. Sales: net profit margin = net income. Remaining profit after costs of production, administration, and financing are deducted from sales, and taxes have been recognized. Asset management ratios & insights: cash turnover = # times that the company"s cash has been spent in a period of time. Measures the frequency of company"s cash account replenishment through the sales revenues: accounts receivable turnover = Measures how many times a business can turn its accounts. Shows # times a company"s inventory is sold and replaced over a period of time.
