Question: Comparing Operating Characteristics Across Industries
Following are selected income statement and balance sheet data for companies in different industries.
Required: a. Compute the following ratios for each company.
1. Gross pro?t/Sales
2. Net income/Sales
3. Net income/Stockholders' equity
4. Liabilities/Stockholders' equity
b. Comment on any differences among the companies' gross pro?t to sales ratios and net income as a percentage of sales. Do differences in the companies' business models explain the differences observed?
c. Which company reports the highest ratio of net income to equity? Suggest one or more reasons for this result.
d. Which company has ?nanced itself with the highest percentage of liabilities to equity? Suggest one or more reasons why this company can take on such debt levels.