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Angelina_Jolie [31]
3 years ago
7

Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability

Business
1 answer:
pantera1 [17]3 years ago
3 0

Company’s profitability is important for a business to survive and remain strong in giving the benefits that shareholder or investors expect. Profitability ratios help measure a company's ability to generate income and profits based on its invested capital. In addition, most analysts and decision makers used these ratios as an <span>indicator of certain aspects of a company's performance.</span>

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On january 1, 2016, knapp corporation acquired machinery at a cost of $1,250,000. knapp adopted the double-declining balance met
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Cost on January 1 2016 = $1,250,000
Life = 10 years

Therefore,
Double-declining depreciation rate = 2*(1,250,000/10)/1,250,000 = 2*0.1 = 2*10% = 20%
Book value at end of 2016 = 1,250,000 - (1,250,000*20/100) = $1,000,000
Book value at end of 2017 = 1,000,000 - (1,000,000*20/100) = $800,000
Book value at end of 2018 = 800,000 - (800,000*20/100) = $640,000

Changing to straight line depreciation:
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Zoe's Bakery operates in a perfectly competitive industry. Suppose that when the market price is $5, the profit-maximizing outpu
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