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Ratio Analysis

In case of Net profit margin should both the answer ie 8.9 & 11.1 have to be written? Also in case is ROA what amount is used in the numerator can you please explain it Can we use ROA = Net Profit/ Total Assets? If yes do what note should I write for it?

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Priyanka Udeshi

Priyanka Udeshi

CA Inter

6K+

08-Mar-21 01:14

18

Answers (3)

Net profit margin of 8.9% is fine but the second formula is a mistake in the book. It should have been EBT(1-T)/Sales. EBIT(1-T)/Sales is valid when there is no interest portion included in it. For ROA, it should be EBIT(1-T)/Assets because here we are taking the total return on assets after tax.


Madhuri Veluri

Madhuri Veluri

Moderator

08-Mar-21 13:01

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