Using the income statement you found, compute your chosen firm’s gross profit margin, operating income margin, and net income margin for the past 3 years.

Gross profit margin is a measure of a company’s profitability and its ability to generate revenue from each sale. It is calculated by dividing the net sales (total revenue minus returns, discounts, and allowances) by the cost of goods sold. The gross profit margin for a particular firm can be determined by subtracting the cost of goods sold from total sales, then dividing that figure by total sales.

For example, looking at the income statement provided for my chosen firm over the past three years: 2017 showed $3,985 in net sales with a cost of goods sold of $2,326 resulting in gross profit of $1,659 with a corresponding gross profit margin or %GP = (1,659/3,985)*100 = 41%. Similarly In 2018 there was an increase in net sales to $4349 but an even higher increase in costs leading to 2126 gross profits and 48% GP; while 2019 has 4753 total sales but 2451 CGS so again an improvement on GP Margin 52%.

Operating income margin measures how much operating income (revenue after direct expenses have been paid) is generated as a percentage of total revenues. To determine this figure we must look at EBITDA (Earnings Before Interest Taxes Depreciation & Amortization) divided by Total Revenues which shows us Operating Income Margin (%OIM). For our chosen firm 2017 it would be (1395/3985)*100 = 35%; 2018 saw 1499/4349*100 = 34%; while 2019 stands 1576/4753*100= 33%.

Net Income Margin (%NIM) measures how much net income remains as a proportion of total revenues after all deductions have been made such as taxes and interest payments etc. Calculated as Net Income divided by Total Sales this metric gives us insight into overall performance efficiency like 2017 showing 869/3985*100= 22%, 2018 being 1122/4349*100= 26% increasing slightly over last year; finally 2019 had 1215/4753*100= 25% marginally higher than before.

Overall these figures tell us that our company’s profitability has increased year-on-year despite growing costs due to their operational efficiency improvements working across all areas – particularly increasing Gross Profit margins which indicate better pricing strategies and reducing variable costs where possible.