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Ratio Analysis of A.O.Smith

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Submitted By Lemontree123
Words 1792
Pages 8
Profitability Ratio:

Profitability ratios measure the overall performance of the firm by determining the effectiveness of the firm in generating profit, and are calculated by establishing relationship between profit figures on the one hand, and sales and assets on the other.
Return on Total Assets:
This is measure of profitability from a given level of investments. It is an excellent indicator of overall performance of a company. It is also called return on capital employed or return on investment. It measures how efficiently the capital is employed. Return on Total Assets = Net Income after Tax / Average Total Assets *100
Return on Equity:
It measures the profitability of equity funds invested in firm. It is regarded as a very important measure because it reflects the productivity of the ownership capital employed in the firm. Return on Equity = Net In

Profitability Ratios
To analyze the profitability of a company profitability ratios are used. These ratios measure theoperating or income performance of a company. The goal of a business is to make a profit, so thistype of ratio examines how well a company is meeting that goal. The commonly used ratios toevaluate profitability are

Analysis
The GP ratio is showing continuously decreasing trend, starting from 2004/05 in 28.91% to 23.79% inthe financial year 2006/07. This shows that a company is loosing its productivity in maintaining itsgross profit margin. In 2007-08 the ratio again slightly been increased from 23.79 to 25.42

Analysis
The NP ratio is showing declining trend from 6.49% in the year 2004/05 to 6.07% in the year 2007/08which shows that there is increased amount of expenses in the form that increasing in the prices of row material

Analysis
This ASSET TURNOVER ratio measures how efficiently a company uses its assets. The asset turnover ratio is decreasing.Although the return on

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