Profitability and Impact on Investor Performance Indicators
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From the Paper:"This ratio is also known as EBIT (De Jong 2014). These are the company's earnings before the interest and taxes are calculated. Therefore, the operating profit margin looks at EBIT as a part of the total percentage of the sales. This ration is a measure of the overall operating efficiency, taking into consideration all the expenses of ordinary daily business activities. When calculating a company's operating profit margin ratio, both terms of the equation come from the company's income statement, as they have been included in the two companies' income statements. Chariot Oil & Gas' operating profit margin ratio went up from 2.5 million in the financial year 2010 to 3.4 million in the financial year 2014. This was a 73% increase. On the other hand, Canadian Overseas Petroleum Limited's operating profit margin ratio went up from 1.7 million in the financial year 2010 to 3.4 million in the financial year 2013. This was a 50% increase. This shows that Chariot Oil & Gas' operating profit margin ratio is way better than that of Canadian Overseas Petroleum Limited. As such, the former is making more money before interest and taxes are calculated than the latter.
"Net profit margin ratio: Bragg (2012) says that whenever a simple profitability ratio is being done, the net profit margin is the most often margin ratio that is used. The function of the net profit margin is to show how much pounds come up as net income after the company has paid all the expenses, such as utilities and other liabilities. The net profit margin measures profitability after all expenses have been considered such as tax, depreciation and interest (Bragg, 2012). For instance, the net profit margin for Chariot Oil & Gas went up from 1.9 million in 2010, increasing steadily, to 3.5 million in 2014. This was a 54% increase. This means that the company made 55 cents from every dollar as its profit. On the other hand, Canadian Overseas Petroleum Limited's net profit margin went up from 1.7 million in 2010, increasing at a steady rate to 3.4 million in 2014. This was a 50% increase. This means Canadian Overseas Petroleum Limited made 53 cents from every dollar as its profit. In comparison, Chariot Oil & Gas performed a little better than Canadian Overseas Petroleum Limited for the period investigated."
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Profitability and Impact on Investor Performance Indicators (2015, November 19) Retrieved October 31, 2020, from https://www.academon.com/case-study/profitability-and-impact-on-investor-performance-indicators-154303/
"Profitability and Impact on Investor Performance Indicators" 19 November 2015. Web. 31 October. 2020. <https://www.academon.com/case-study/profitability-and-impact-on-investor-performance-indicators-154303/>