Analyze the financial performance of your division
You have been given the financial statements and asked to analyze the financial performance of your division. Other managers have suggested you use financial ratios in your analysis. What are financial ratios? Which ratios might you use in your analysis? List them and explain what information they provide. How would you use them to make managerial decisions?© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/accounting/analyze-the-financial-performance-of-your-division-7g7h
Leverage: Assets / Shareholder's Equity
Gross Margin = Gross Profit / Sales.
Gross margin measures the profitability considering only variable costs and is a measure of the percentage of revenue that goes to fixed costs and profit.
Net Profit Margin = Net Income / Sales
Total Asset Turnover = defined as Sales / Total Assets
Return on Assets (ROA) = Net Income / Assets
ROA is a measure of the return on money provided by both owners and creditors, and is a measure of how efficiently all resources are managed.
Return on Equity (ROE) = defined as Net Income / Equity
Where the equity value is the shareholder's equity at the end of the period in which the income was earned. ROE is a measure of the return on money provided by the firm's owners.
ROE can be calculated ...