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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Research and Analysis Using the Annual Report

Obtain Whirlpool’s Fiscal 2016 10-K (filed Feb. 13, 2017) through the "Investor Relations" portion of its website (do a web search for Whirlpool investor relations). Once at the Investor Relations section of the website, look for "SEC Filings" under the "FINANCIAL INFORMATION" header. When you see the list of all the filings, either filter for the "Annual Filings" or search for "10-K." Another option is to go to www.sec.gov and click "Company Filings Search" under "Filings."

Required:

Evaluate the trend of Whirlpool’s operating margin and net profit margin and relate the trend to the industry averages of 10.59% and 7.93%, respectively.

To determine

Concept introduction:

Profitability ratios:

Sales is very important for any business and a company’s growth and its future is determined by the sales revenue it has generated. Therefore analysts measure the return the company is earning on sales through some ratios and these are called as profitability ratios. The three important profitability ratios are gross profit margin ratio, operating margin ratio and net profit margin ratio.

Evaluate the operating margin and net profit margin trend of Whirlpool and compare it with the trend of industry averages trend of 10.59% and 7.93% respectively.

Explanation

The operating margin and net profit margin values of Whirlpool has been taken from the Sec.gov website. From the 10K filing report for 2016 the figures have been taken for a period of five years i.e. from 2012 to 2016. Now let us look at the trend of the operating margin of Whirlpool against the industry average.

Operating Margin trend of Whirlpool for Five Years
Year Operating Margin Industry Average
2012 4.8% 10.59%
2013 6.7% 10.59%
2014 6.0% 10.59%
2015 6.2% 10.59%
2016 6.5% 10.59%

After analysing the table it can be clearly seen that the operating margin of Whirlpool has been continuously rising since 2012 but it is far below the industry average...

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