Ratios



Ratios provide the users of financial statements with a great deal of information about the entity.  Do ratios tell the whole story?  How could liquidity ratios be used by investors to determine whether or not to invest in a company?    

 

 

and 

 

 

 

 

Profit Margin

 

Year Ending December 2012

Year Ending December 2011

Year Ending December 2010

Revenues

40,000

35,000

33,000

Operating Expenses

 

 

 

Salaries

15,000

10,000

9,000

Maintenance and Repairs

6,000

9,000

10,000

Rental Expense

2,500

2,500

2,500

Depreciation

2,000

2,000

2,000

Fuel

4,000

3,500

2,500

Total Operating Expenses

29,500

27,000

26,000

Operating Income

10,500

8,000

7,000

Sales and Administrative Expenses

6,000

4,000

3,000

Interest Expense

2,500

2,000

1,000

Net Income

2,000

2,000

3,000





Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012.  Calculate the net-profit margin  for each of these years.  Comment on the profit margin trend. 

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