Discussion Questions 1 and 2
DQ #1: Ratios
Ratios provide the users of financial statements with a great deal of information about the entity. Do ratios tell the whole story? How could liquidity ratios be used by investors to determine whether or not to invest in a company?
DQ #2: Profit Margin
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Year Ending December 2012
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Year Ending December 2011
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Year Ending December 2010
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Revenues
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40,000
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35,000
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33,000
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Operating Expenses
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|
|
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Salaries
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15,000
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10,000
|
9,000
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Maintenance and Repairs
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6,000
|
9,000
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10,000
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Rental Expense
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2,500
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2,500
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2,500
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Depreciation
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2,000
|
2,000
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2,000
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|
Fuel
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4,000
|
3,500
|
2,500
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Total Operating Expenses
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29,500
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27,000
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26,000
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Operating Income
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10,500
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8,000
|
7,000
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Sales and Administrative Expenses
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6,000
|
4,000
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3,000
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Interest Expense
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2,500
|
2,000
|
1,000
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Net Income
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2,000
|
2,000
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3,000
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Above is a comparative income statement for Cecil, Inc. for the years 2010, 2011, and 2012. Calculate the net-profit margin for each of these years. Comment on the profit margin trend.