S&J Plumbing, Incorporated's income statement shows a net profit before tax of $468 and net sales of...

Question

S&J Plumbing, Incorporated's income statement shows a net profit before tax of $468 and net sales of
$7,482 for 2010. Total assets are at $3,244. The balance sheet lists the company’s equity for fiscal year
ending 2010 as $1,746.
Calculate the following ratios for this company:
• Return on sales ratio (net profit margin)
• Return on assets (ROA)
• Return on equity (ROE)
Write a paper of 2-3 pages about the efficiency of S&J Plumbing, Inc.

financial-analysis-unit-2-3msi1eye-5pgwrkxx.pdf

Angel K · Accepted Answer

RATIO ANALYSIS
S&J PLUMBING
1. RATIO ANALYSIS
A)  RETURN ON SALES RATIO
Return on sales/ net profit margin		=	*100
							=	*100
							=	6.25%
B)  RETURN ON ASSETS RATIO
Return on assets 				=	*100
							=	*100
							=	14.42%
C)  RETURN ON EQUITY
Return on equity				=	
							=	*100
							=	26.80%
2. EFFICIENCY ANALYSIS OF S&J PLUMBINGS
Efficiency is a measure of the quantity of output that a business can produce for the per unit of input available. Efficiency is a measurement which is used to analyze how effectively and appropriately a business can converts its inputs available such as capital, assets, manpower and the raw materials in to outputs like income, finished goods and provision of services. The management and those charged with governance could measure the efficiency in a number of ways. The best method a management can use to measure the efficiency and asses the financial health of the organization is through ratio analysis. Ratio analysis can be termed as a method used to gain a deep view into a company’s liquidity, efficiency in operation and control and the profitability of its production or provision by studying its financial statements such as cash flows, balance sheet and statement of income.
A return on sales ratio also known as net profit margin ratio is equal to how much income less of operating cost or profit before tax a company can produce as a percentage on the revenue earned from operations.

S&J Plumbing, Incorporated's income statement shows a net profit before tax of $468 and net sales of $7,482 for 2010. Total assets are at $3,244. The balance sheet lists the company’s equity for...

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