Financial Ratios -- Profitability

[@kevinbracker]

@tomodachiATfrontru No. Net Profit Margin uses Net Income (which is after interest and taxes). Operating Profit Margin uses Operating Income (which is before interest and taxation).

[@tomodachiATfrontru]

NPM usually takes net income BEFORE interests and taxation, whilst ROA net income AFTER taxation and preference dividends (if any)

[@kevinbracker]

It's not necessarily that they aren't using their assets to full capacity (although that could be a possibility). Often times, it has to do with the nature of the business. How asset intensive is the industry? How much competition is there in the industry? How much brand identity/pricing power does the business have? All of these things play a part. That is why it is important to provide context through trend and comparative analysis. How do these numbers change over time or vs. peers?

[@jamesperry3837]

Very impressive! Thank u, Sir.

[@shabdo]

Hello sir , I have a problem with this question - A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion, financed half by debt and half by common equity. What is its profit margin? What is its ROA? What is its ROE? I have calculated profit margin & ROA ,but i cannot find ROE,What is the common equity in this problem?

[@kevinbracker]

@shabdo Assets = Liabilities + Owners Equity.

[@banessa22]

Thank you so so much! I'm at the end of my bachelors and my husband is finishing his masters but for the life of us we could not get this.

[@Makeupgirl1978]

Thank you for this!!!

[@Raqeeb1989]

thank you so much

[@jamesperry3837]

Sir, u said Coca Cola's ROA of 16.95% is not as impressive as NI of 21.09%, which indicates that CC has still a few more assets tied up....???? Can u pls take the time off to explain. Thank you. ( My guess is that CC is not using its assets to the full capacity. Is this correct? )

[@brendasandidge7717]

Hi Kevin, I enjoy your videos, they are very easy to follow. Do you have other videos that show how to calculate DSCR? I know that in order to get your Debt Service Coverage ratio, you have to find out what your NOI is and to get your NOI, you have take your total annual gross income minus your net operating expenses. The NOI is then divided by the total debt service. Is this correct?

[@kevinbracker]

I don't cover that ratio in my classes, so I don't have a video on it. Looking at your explanation, it seems like you have the idea down.