profit margins and turnover ratios vary from one industry to another. identify differences you would expect to find between a grocery chain and a steel company. consider particularly the turnover ratios, the profit margin, and the dupont equation.

Respuesta :

Differences to be anticipated:

  • Profit Margin: Compared to steel products, groceries have smaller profit margins.
  • Turnover Ratios: A steel company requires more cash to get started than a grocery store.
  • Grocery stores have a lower profit margin than steel businesses, according to the Dupont Equation.

The profit margin is one of the most often used performance indicators to determine how much money a business or organizational activity earns.

Creditors can evaluate a company's ability to fulfill its short-term debts using financial ratio analysis.

Long-term creditors can learn about the company's ability to pay interest expenses and long-term liabilities by analyzing profitability statistics.

Businesses with higher profit margins have lower costs of sales and hence generate more profit, and the opposite is also true. A business with a higher turnover ratio probably produces and sells its goods more quickly than a business with a lower turnover ratio.

For the following reasons, the profit margins and turnover ratios of the steel company and grocery chain differ:

  • Groceries are sold at lower profit margins than steel items.
  • A supermarket business needs less money to get started than a steel company does.

Using the DuPont equation, the profit margin, turnover ratio, and financial leverage are multiplied to determine the return on equity. Lessening capital and margin requirements lead to higher turnover ratios. Grocery stores have a lower profit margin than steel companies.

To learn more about Dupont Analysis, refer to this link:

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