Question

I have to write a paper about Apple finances for the fiscal year of 2017 and 2018 I am asked to provide a brief analysis of each of the ratios, here is the first ratio.

Apple Inc Fiscal Year Sept. 2018 Sept. 2017 1..Profitability Ratios: Gross Margin %= Gross profit/Net Sales (Net Sales-Cost of sales)/Net Sales= (265,595-163,756)/265,595=.3834 (229,234-141,048)/229,234=.3846 38.3% 38.5% Sept Sept EBIT Margin %= EBIT/Net Sales 70,898/265,595=.2669 61,344/229,234= .2676 26.7% 26.8%  

Answer 1

The first ratio i.e. Gross Profit ratio represents how much the company earns Just from the sale of goods after deducting all the direct expenses i.e. the only cost of sales and before deducting any other indirect expenses. In the present case, the gross profit margin was reduced by 0.12% due to an increase in Net sales. Gross profit margin is a rough measure of a company's profitability.

EBIT Margin on the other also considers all the operating expenses except interest and taxes along with the gross profit calculated above. This is also called Operating Profit Margin. This shows how a company is operating and evaluates its operational (or say core business) performance. Also, this ratio does not consider any type of interest burden or tax burden which are not related to operations of the company.