![]() ![]() Well that tells us for each dollar of assets, right? For each dollar of the denominator, how much of the numerator we get. Right? So the profit margin tells us how much at the end of the day we keep for each dollar we sell and then the second one total asset turnover. So we when we sell something to a customer we'll we gotta pay for it cost a good sold operating expenses, interest, all the things we pay for. That's our top of the income statement and net income, that's the bottom of the income statement. It tells us how much net income we get for each dollar of sales, right? How much of the numerator per one of the denominator? So how much net income per dollar of sales. So our profit margin is this first ratio net income divided by net sales? That's tells us so look below the profit margin. And when we multiply them together, it gives us a return on assets. ![]() So those are two other ratios that we learn about. Is going to be equal to the profit margin, times the total asset turnover. Well we're gonna break it up into two ratios. Net income divided by average total assets. So when we first discussed our way, that's how we learned it. ![]() Remember that are away? We learned it as net income over average total assets. So this gives us a little more information of how we derive our our away and how we decompose it. If not you're gonna learn about them here. You might have learned about these already. We learned about profitability and we learn about efficiency with this ratio and we'll see why once we decompose it a little better so we can break up the R. Well we learned about two things with it. Remember our away it measures the income a company gets company earns based on the amount of assets it maintains. So we've learned about the return on assets before now, we're gonna decompose that ratio a little bit and get better information. ![]()
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