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Final Project

Profitability Ratio Analysis

Student's Message: Subject: Operating assets

Msg No. 507192

Respected Sir! Average operating assets are equal to operating assets? Will we use the following formula to compute them ....Operating Assets Turnover= Net sales/ Average Operating assets*100 ..........we can make assumption that avg operating assets are equal to operating assets.................Regards Post Your Comments Other Students' Comments: 0 Instructor's Reply: Dear Student

Average operating assets will be =

(Previous year operating assets + Current year operating assets) / 2

While operating assets turnover =

Net Sales / Avg. Operating Assets

It will not be multiplied by 100 as measuring unit will be in

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Times not in Percentage.

Subject: DuPont Return on Assets Sir out of following, which formula is correct for "DuPont Return on Assets"

1- (Net Profit/Net Sales)*(Net Sales/Total Assets)*100 2(Net profit x Net sales)/(Net sales x Total assets)

Please also elaborate that is this presented in "percentage"?

Operating available)}

income

Gross +

profit Other

{Distribution

cost

+ (if

Administrative

expenses

operating

expenses

Subject: Operating Income and Operating & Fixed Assets in Bank Industry Dear Sir, 1. What is operating income in bank industry. 2. Are these can be considered as FIXED ASSETS "Lending to financial institutions, Investments- gross, Advances - gross, Operating fixed assets" 3. What are FIXED ASSETS and OPERATING ASSETS in Bank Industry, please. Post Your Comments Other Students' Comments: 0
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Instructor's Reply: Dear Student

Profit before taxation will be considered as operating profit in case of banking industry.

Fixed assets are clearly mentioned as Operating Fixed Assets in the Balance Sheet of banks.

While operating assets of banks normally consist of:

Lending to financial institutions + Net investments in held for trading securities + Advances (net) + Other assets (net excluding tax recoverable and dividends receivable) + Operating fixed assets

Student's Message: Subject: Gross Profit and Total Revenue

Msg No. 507139

Dear Sir! Most respectfully i beg to ask that what is gross profit and total revenue in banking sector how to find them. Regards Post Your Comments Other Students' Comments: 0 Instructor's Reply:
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Dear Student

In case of banks. The first figure of Income Statement (Markup or Interest Earned) is taken as Sales. While Net markup/ Interest earned (before provisions) is taken as gross profit figure.

Student's Message:

Msg No. 507130

Subject: problems regarding terms used in bank industry Dear Sir, 1. I,ve selected bank sector for profitability ratios analysis. and following ratios are held in this project. Is it compulsory to calculate/analyses all these ratios in bank industry. Net profit margin = Net profit / Net sales Return on Assets = Net profit / Total assets Dupont return on Assets = (Net profit x Net sales) / (Net sales x Total assets) Operating income margin = Operating income / Net sales Operating Assets turnover = Net sales / Average operating assets Return on operating Assets = Net profit / Operating assets Sales to fixed Assets = Net sales / Fixed assets Return on total equity = Net profit / Share holders equity Gross profit Margin = Gross profit / Net sales 2. as in bank there are not sales etc. then what will be consider in place of sales i.e. net sales, average operating sales etc. and other terms which are not held in bank industries but consider in that place. i have problems regarding the terms used in bank and normal business. please help Post Your Comments Other Students' Comments: 0
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Instructor's Reply: Dear Student

In case of banks. The first figure of Income Statement (Markup or Interest Earned) is taken as Sales. While avg. operating assets are obtained by

(Opening balance of operating assets + Closing balance of operating assets) / 2

Operating assets are clearly mentioned in balance sheet of banks. In case of non availability then operating assets will be find out in this way for banking industry:

Operating assets of banks = Lendings to financial institutions + Net investments in held for trading securities + Advances (net) + Other assets (net excluding tax recoverable and dividends receivable) + Operating fixed assets

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