Question

Diusitech Inc. Income Statement For the Year Ending on December 31 (Millions of dollars)

Answer 1

Answer:

Year 1

Profit Margin = Net Income / Net Sales

Profit Margin = $751 / $2,500

Profit Margin = 0.3004

Profit Margin = 30.04%

Basic Earning Power = Operating Income / Total Assets

Basic Earning Power = EBIT * Return on Total Asset / Net Income

Basic Earning Power = $1,360 * 17.18%/751

Basic Earning Power = 0.311115846

Basic Earning Power = 31.11%

Year 2

Operating Margin = Operating Income / Net Sales

Operating Margin = $1,896 / $3,175

Operating Margin = 0.5971653543307087

Operating Margin = 59.72%

Return on Total Assets = Basic Earning power * Net Income/EBIT

Return on Total Assets = 26.13% * $984/$1,896

Return on Total Assets = 0.1356113924050633

Return on Total Assets = 13.56%

Return on Common Equity = Net Income / Total Common Equity

Return on Common Equity = $984 / ($751/32.30%)

Return on Common Equity = $984 / $2325.08

Return on Common Equity = 0.42321124

Return on Common Equity = 42.32%