= Net Income Tax ÷ Net Sales Tells you the profit per sales dollar after all expenses are deducted = $23,000 ÷ $500,000 from sales. This margin will vary between industries as well as = 4.6% between companies in the same industry. = Net Income after Tax ÷ Weighted Expresses the corporation's net Average Number of Common income after taxes on a per share of Shares Outstanding common stock basis. The computation requires the deduction = $23,000 ÷ 100,000 of preferred dividends from the net income if a corporation has = $0.23 preferred stock. Also requires the weighted average number of shares of common stock during the period of the net income. = Earnings for the Year before Indicates a company's ability to Interest and Income Tax Expense ÷ meet the interest payments on its Interest Expense for the Year debt. In the example the company is earning 3.3 times the amount it is = $40,000 ÷ $12,000 required to pay its lenders for interest. = 3.3 = Net Income for the Year after Taxes Reveals the percentage of profit ÷ Average Stockholders' Equity after income taxes that the during the Year corporation earned on its average common stockholders' balances = $23,000 ÷ $278,000 (a computed during the year. If a corporation has average) preferred stock, the preferred dividends must be deducted from = 8.3% the net income.
= = = Net Income Tax ÷ Net Sales $23,000 ÷ $500,000 4.6% Tells you the profit per sales dollar after all expenses are deducted from sales. This margin will vary between industries as well as between companies in the same industry. = = = Net Income after Tax ÷ Weighted Average Number of Common Shares Outstanding $23,000 ÷ 100,000 $0.23 Expresses the corporation's net income after taxes on a per share of common stock basis. The computation requires the deduction of preferred dividends from the net income if a corporation has preferred stock. Also requires the weighted average number of shares of common stock during the period of the net income. = = = Earnings for the Year before Interest and Income Tax Expense ÷ Interest Expense for the Year $40,000 ÷ $12,000 3.3 Indicates a company's ability to meet the interest payments on its debt. In the example the company is earning 3.3 times the amount it is required to pay its lenders for interest. = = = Net Income for the Year after Taxes ÷ Average Stockholders' Equity during the Year $23,000 ÷ $278,000 (a computed average) 8.3% Reveals the percentage of profit after income taxes that the corporation earned on its average common stockholders' balances during the year. If a corporation has preferred stock, the preferred dividends must be deducted from the net income.
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