#Comment size income statement-- an income statement in which each item is expressed as a percentage of sales. #Gross profit margin-- measures the percentage of each sales dollar remaining after the firm has paid for its goods. #Operating profit margin-- measures the percentage of each sales dollar remaining after all costs and expenses other than interest, taxes, and preferred stock dividends are deducted; the pure profits earned on each sales dollar. #Net profit margin-- measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and preferred stock dividends, have been deducted. #Return on total assets (ROA)-- measures the overall effectiveness of management in generating profits with its available assets; also called the return on investment (ROI). #Return on common equity (ROE)-- measures the return earned on the common stockholders investment in the firm. #Market ratios-- relate a firm's market value, as measured by its current share price, to certain accounting values. #Price/earnings (P/E) ratio-- measures the amount that investors are willing to pay for each dollar of a firm's earnings; the higher the P/E ratio, the greater the investor confidence. #Market/book (M/B) ratio-- provides an assessment of how investors view the firm's performance. Firms expected to earn high returns relative to their risk typically sell at higher M/B multiples. #DuPont system of analysis-- system used to dissect the firm's financial statements and to assess its financial condition. #DuPont formula-- multiplies the firms net profit margin by its total asset turnover to calculate the firm's return on total assets (R0A). #Modified DuPont formula-- relates the firm's return on total assets (R0A) to its return on common equity (ROE) using the financial leverage multiplier (FLM). #Financial leverage multiplier (FLM)-- the ratio of the firm's total assets to its common stock equity.