Columbia College Facebook Company Profitability Ratio Analysis Review

For this study case, we will focus on the company’s profitability ratios. Profitability ratios are very important to investors. Companies often use these ratios when evaluating their managers.

Profitability should be viewed from three different perspectives:

1. Profitability in relation to sales.
2. Profitability in relation to assets.
3. Profitability in relation to equity.

It is quite possible for the company to perform well from one perspective and poorly from another. 

Study case (Facebook Inc)

Report Headings

Name of Company  (Facebook Inc) and Ticker Symbol : Company name, ticker symbol

10-K Report: Paste the direct URL to the company’s most recent 10-K Report

Company Website: Paste the URL to the company’s website

Industry name and NAICS Code: Provide the name and NAICS code associated with the Industry Average data.

Profitability Ratios: Follow the formatting in the example below to present the data. See this sample eStatement Studies document  (refers to week7)for help in finding the industry average data needed for this assignment.

20XX

20XX

20XX

Industry Average**

Gross Profit Margin
(Gross Profit / Sales)

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Operating Profit Margin
(Operating Profit / Sales)

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Pre-Tax Net Profit Mg
(Pre-Tax Profit** / Sales)

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Pre-Tax Return on Equity (Pre-Tax Profit* / Shareholders Equity)

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Pre-Tax Return on Assets (Pre-Tax Profit** / Total Assets)

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*use Pre-Tax Profit to make the comparison to the industry average more accurate.
**There will be a single industry average for the gross, operating, and pre-tax net profit margins. List all 3 industry average figures for the pre-tax return on equity and the pre-tax return on assets.

Evaluation: Share what we learn from the data and information collected for this discussion. Interpret each of the ratios. Review the Financial Ratios Guidelines document for direction. Do you see any red flags? How profitable is the company in relation to sales? How profitable is it in relation to assets? How profitable is it in relation to equity?