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Analysis of Financial Statements

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The EBITDA coverage ratios assess if the firm’s ability to pay interest charges of its debts. The ratio may indicate that the company do not have enough interest coverage to pay off its interest expense. The ratios indicate that the company is more leveraged and that if the firm tries to borrow additional capital it may face difficulties. It also may face difficulties in meeting interest charges.
Calculate the 2013 profit margin, basic earning power, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?
The   profitability ratios measure the income or operating success of the company for a given period of time. Financial analyst frequently use profitability as the ultimate test of management’s operating effectiveness. The profitability ratios are profit margin, basic earning power (BEP), return on assets (ROA), and return on common equity (ROE). To calculate the following profitability ratios for 2013:

Profit margin = Net income available to stockholders ÷ Sales

(- $95,136) ÷ ($5,834,400)

Profit margin = - 1.6%


Basic earning power (BEP) = EBIT ÷ Total assets

= $17,440 ÷ $2,886,592

Basic earning power (BEP) = 0.60%


Return on assets (ROA) = Net income available to common stockholders ÷

Total assets

-$95,136 ÷$2,886,592

Return on assets (ROA) = -3.3%



Return on equity (ROE) = Net income available to common stockholders ÷ Common equity

= (-$95,136) ÷ ($557,632)

Return on equity (ROE) = -17.1%

The profit margin of the company is a negative which is -1.6%. It is the percentage of each dollar of sales. The ratios reveals a negative profit. The basic earning power (BEP) of 0.60% show that the earning power of the company’s assets before the influence of taxes and debts is very low. The return on assets ratio determines how profitable...

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"Analysis of Financial Statements". Anti Essays. 15 Dec. 2018


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Analysis of Financial Statements. Anti Essays. Retrieved December 15, 2018, from the World Wide Web: http://trenmayamx.com/free-essays/Analysis-Of-Financial-Statements-728676.html