Finance- Which profitability ratios are most important when assessing the quality and the quantity

| January 30, 2017

Question
1. Which profitability ratios are most important when assessing the quality and the quantity of a firm’s profits? Why is that? What is meant by the quality of a firm’s profits?

2. Give a break analysis of at least one of the following profit ratios for Bank of America, year ending 2014, in at least 100 words.

III. Profitability Ratios

1. Net Profit Margin

2. Total Asset Turnover

3. Return on Assets

4. Operating Income Margin

5. Operating Asset Turnover

6. Return on Operating Assets

7. DuPont Return on Operating Assets

8. Sales to Fixed Assets

9. Return on Investment

10. Return on Total Equity

11. Return on Common Equity

12. Gross Profit Margin

3. Financial leverage is the use of financing with a fixed charge, like interest. The computation can be calculated in several ways. One way is the % change Net income/%change EBIT. However, it can also be calculated as earnings before interest and tax/earnings before tax. Now let’s discuss how investors view this and if it does work?

4. Is it possible to have to little leverage?

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