Discuss the pros and cons of using the various measures of profitability to examine a company’s performance.
Chapter 11
Discuss the pros and cons of using the various measures of profitability to examine a company’s performance.
Differentiate between the balance sheet, income statement, and statement of cash flows.
Identify three external stakeholders of an organization who management should be prepared to communicate the key elements of the financial statements.
What type of annual report should a company produce and why?
Chapter 12
Why is the capital structure of a business important?
Why is cash management important for a sports organization?
Which funding option would be the most economical to issue if you were trying to raise $200 million?
What does flotation cost mean?
Why is the time value of money important?
Why is the payback rule important when analyzing financial issues?
If you were to make a capital-budgeting decision based on project cash flows, would you prefer to use NPV, the IRR method, the payback rule, or the discounted payback rule? Why would you use the method that you have selected? What is the advantage of using multiple methods?
Try to determine the break-even point for selling 500 hot dogs at a game knowing the fixed costs are $250 for the game. Look up the cost for hot dogs, condiments, buns, and paper plates to help determine what the variable costs will be.
If you were to develop a managerial accounting approach to measure the nonfinancial success of your school’s athletic programs, what would you measure, how will you get that data, and how will you respond to the information you would uncover?
Chapter 13
Discuss three comparative benchmarks a company can use to assess its financial performance.
Discuss the four key categories of financial ratios.
Identify three companies you would compare Under Armour’s financial ratios against?
Who would be three external stakeholders interested in a company’s financial ratios?
Chapter 14
What is the most important part of the financial strategy process?
If you were to start a sports facility business, what business model would you use and why?
What do you think is the future of the Pilates industry and why? Examine the industry as a strategic investor who might want to invest money in opening a Pilates studio.
If you owned a professional team in the United States and were thinking about expanding internationally, where might you attempt to purchase a similar sports league–based team? Support your decision with sound research and advice.
If you ran a bowling alley that was struggling financially to pay the bills, what strategy would you pursue if you start falling further and further behind in paying your bills?
Solved by verified expertGross Profit Margin:
The gross profit margin is calculated as the gross profit divided by total revenue. It represents the amount of revenue that remains after accounting for the cost of goods sold.
Pros:
It provides a quick and straightforward measure of how much profit a company is making on its products or services.
It can be used to compare the profitability of different products or services within a company.
Cons:
It does not consider the company’s operating expenses, which can be significant.
It can be affected by fluctuations in the cost of goods sold, which may not be under the company’s control.
Net Profit Margin:
The net profit margin is calculated as th
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Pros:
It provides a more comprehensive measure of profitability, as it considers all expenses, including operating expenses, interest, and taxes.
It can be used to compare the profitability of different companies, regardless of their size or industry.
Cons:
It can be affected by non-recurring expenses, such as one-time charges or write-offs.
It may not reflect the company’s cash flow, as some expenses, such as depreciation, are non-cash items.
Return on Assets (ROA):
ROA is calculated as the net income divided by total assets. It represents how much profit a company is generating for each dollar of assets it owns.
Pros:
It provides insights into how efficiently a company is using its assets to generate profits.
It can be used to compare the performance of companies within the same industry.
Cons:
It does not consider the company’s liabilities, which can affect its profitability.
It can be affected by the company’s accounting practices, such as how it depreciates its assets.
Return on Equity (ROE):
ROE is calculated as the net income divided by shareholders’ equity. It represents how much profit a company is generating for each dollar of equity invested by shareholders.
Pros:
It provides insights into how well a company is using its shareholders’ funds to generate profits.
It can be used to compare the performance of companies within the same industry.
Cons:
It does not consider the company’s liabilities, which can affect its profitability.
It can be affected by changes in the company’s capital structure, such as the issuance of new shares or the repayment of debt.
In conclusion, each measure of profitability has its own advantages and limitations. Therefore, it is essential to use multiple measures of profitability to get a comprehensive understanding of a company’s performance. Additionally, it is crucial to consider other factors, such as the company’s liquidity, solvency, and cash flow, when assessing its financial health.
