In your position as research assistant to a portfolio manager, you need to analyze the profitability of the companies in the portfolio. Using the data for Electronic Arts, Inc. (NASDAQ: EA) below: a. Fiscal Year Total Revenue Net Income 2016 4,396 1,156 2015 4,515 875 2014 3,575 8 2013 3,797 98 2012 4,143 76 Calculate the net profit margin for each year. Calculate the compound average annual growth rates (CAGR) for revenue and net income using the GEOMEAN function. Is net income growing more slowly or faster than total revenue? Is this a positive for your investment in the company? Calculate the average annual growth rate of total revenue using the AVERAGE function. Is this result more or less accurate than your result in the previous question? Why?

In your position as research assistant to a portfolio manager, you need to analyze the profitability of the companies in the portfolio. Using the data for Electronic Arts, Inc. (NASDAQ: EA) below: a. Fiscal Year Total Revenue Net Income 2016 4,396 1,156 2015 4,515 875 2014 3,575 8 2013 3,797 98 2012 4,143 76 Calculate the net profit margin for each year. Calculate the compound average annual growth rates (CAGR) for revenue and net income using the GEOMEAN function. Is net income growing more slowly or faster than total revenue? Is this a positive for your investment in the company? Calculate the average annual growth rate of total revenue using the AVERAGE function. Is this result more or less accurate than your result in the previous question? Why?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...

See similar textbooks

Similar questions

Discuss your assumptions on the key factors such as industry characteristics, firm characteristics, sales growth, profit margin, dividend policy, asset requirement, and leverage. How do these factors affect your forecasting of financial statements? And discuss why the circular reference occurs between the proforma income statement and balance sheet in your forecasting model?
Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.80; P0 = $32.50; and g = 8.00% (constant). What is the cost of equity from retained earnings based on the DCF approach?
Using the following data for Jackson Products Company, answer Parts a through g: Evaluate the liquidity position of Jackson relative to that of the average firm in theindustry. Consider the current ratio, the quick ratio, and the net working capital (currentassets minus current liabilities) for Jackson. What problems, if any, are suggested by thisanalysis?b) Evaluate Jackson’s performance by looking at key asset management ratios. Are anyproblem apparent from this analysis?c) Evaluate the financial risk of Jackson by examining its times interest earned ratio and itsequity multiplier ratio relative to the same industry average ratios.d) Evaluate the profitability of Jackson relative to that of the average firm in its industry,.e) Give an overall evaluation of the performance of Jackson relative to other firms in itsindustry.f) Perform a DuPont analysis for Jackson. What areas appear to have the greatest need forimprovement?g) Jackson’s current P/E ratio is 7 times. What factor(s) are…
Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: a. They show the probability of whether the company will face problems in operations. b. They show the profitability of the company over a specific period of time. c. They show the relative proportion of debt items with respect to shareholders' equity or total capital. d. They show the relative levels of liquid assets of the company. According to the information given in the table below, which of the following is Raw materials consumed? Opening Stock Raw Materials 32300 Purchases 128800 Freight in 4950 Sales return 2350 Wages paid to labor 78900 Closing Stock Raw Materials 28400 Select one: a. 135300 b. 149900 c. 143700 d. 137650 d. Current ratio
1. What are some of the tests of a sound or healthy long-term financial position? 2. Give some indications of managerial efficiency in the use of company resources. 3. What are the most commonly used techniques in the analysis and interpretation of financial statements? 4. What are the steps involved in using trend percentages in financial analysis? 5. Distinguish between horizontal and vertical analysis of financial statement data 6. What is the basic objective in looking at trends in financial ratios and other data? 7. Define trendpercentages 8. Discuss the steps in analyzing financial statements using trend percentages. 9. In financial statement analysis, what is the basic objective of observing trends in data and ratios? Suggest some other standards of comparison. 10. Distinguish between trend percentages and component percentages. 11. Which would be better suited for analyzing the change in sales over a term of several years? 12. Nets sales of the Premiere General Store have been…
The file Fortune500 contains data for profits and market capitalizations from a recent sample of firms in the Fortune 500 a. Prepare a scatter diagram to show the relationship between the variables Market Capitalization and Profit in which Market Capitalization is on the vertical axis and Profit is on the horizontal axis. Comment on any relationship between the variables. b. Create a trendline for the relationship between Market Capitalization and Profit. What does the trendline indicate about this relationship?
The scatter chart in the following figure was created using sample data for profits and market capitalizations from a sample of firms in the Fortune 500. a. Discuss what the scatter chart indicates about the relationship between profits and market capitalization? b. The data used to produce this are contained in the file Fortune500. Calculate the covariance between profits and market capitalization. Discuss what the covariance indicates about the relationship between profits and market capitalization? c. Calculate the correlation coefficient between profits and market capitalization. What does the correlations coefficient indicate about the relationship between profits and market capitalization?
The metrics based on nonfinancial information are known as ______. A. quantitative factors B. qualitative factors C. stakeholders D. stockholders
The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in part C.
After conducting a CVP analysis, most businesses will then recreate a revised or projected income statement incorporating the results of the CVP analysis. What is the benefit of taking this extra step in the analysis?
Using the data in the following table for a number of firms in the same industry, dothe following:•a. Compute the total asset turnover, the net profit margin, the equity multiplier, andthe return on equity for each firm.b. Evaluate each firm’s performance by comparing the firms with one another.Which firm or firms appear to be having problems? What corrective actionwould you suggest the poorer performing firms take? Finally, what additional data would you want to have on hand when conducting youranalyses?Firm (in million Dollars A B C D Sales $20 $10 $15 $25 Net Income after sales 3 0.5 2.25 3 Total Assets 15 7.5 15 24 Stockholders’ Equity 10 5 14 10
How do managers, bankers, and security analysts use (a) trend analysis, (b) benchmarking,(c) percent change analysis, and (d) commonsize analysis?