¶ … warp, Clipboard Tablet Company had the ability to look back and use data based on previous known financial performance in their decision making. The company made decisions regarding pricing strategies along with the allocation research and development resources following the analysis of past performance. During the second warp period, the company used CVP to make critical financial decisions not only based on the past performance but also the present and future perfomances (Baye, 2007). Though the use of these strategies during the first and second warp were beneficial to the company, the decisions they helped in making led to the decline of sales of both the X5 and X6. In addition, these strategies concentrated only on the pricing and increasing the contribution of the computers. The company also resorted to maximizing the profit without further investment and setting the price of the X7 higher to make it competitive, including decreasing the price of both the X5 and the X6. This led to decline in profits and to curb this, there is need for the implementation of a new strategy. The new strategy recommended for Clipboard Tablet Company is the profitability ratio analysis; which is correlated to the CVP. Review of the Literature

Profitability ratios is the most used financial analysis tool in determining a company's bottom line and return to its investors. Profitability measures are important to company managers and owners alike since the outside investors who have put their own money into the company, will have to be convinced by the company that it is doing well financially..

According to Bodie, Kane, & Marcus (2004), profitability ratios measure a company's ability to generate earnings relative to sales, assets and equity. These ratios assess the ability of a company to generate earnings, profits and cash flows relative to some metric, often the amount of money invested. The widely used profitability ratios are return on sales, return on equity, gross profit margin and net profit margin among others. All of these ratios...

Different profitability ratios provide different useful insights into the financial health and performance of a company. For example, gross profit and net profit ratios tell how well the company is managing its expenses. Return on capital employed tells how well the company is using capital employed to generate returns. Return on investment tells whether the company is generating enough profits for its shareholders.
In their book Finance, Groppelli & Ehsan argue that profitability ratios form a core set of bottom-line ratios crucial to all investment analysis. Profitability ratios are typically based on net earnings, but variations will occasionally use cash flow or operating earnings. In addition, they outline that for most of these ratios, a higher value is desirable (Groppelli & Ehsan, 2000). A higher value means that the company is doing well and it is good at generating profits, revenues and cash flows. Profitability ratios give meaningful information only when they are analyzed in comparison to competitors or compared to the ratios in previous periods. Therefore, trend analysis and industry analysis is required to draw meaningful conclusions about the profitability of a company.

Time Warp 3

Both the first and second time warps though helped the company make critical decisions concerning their products pricing, they nevertheless led to loss of revenue for some tablets and overall diminished profitability for the company. For this forecast, we use the Gross Profit Margin Ratio which is calculated by dividing the Gross Profit by the Net Income. Lower ratios show the company is not profitable and for every net income there is a recorded loss realized by the firm. The gross profit margin looks at cost of goods sold as a percentage of sales. This ratio looks at how well a company controls the cost of its inventory and the manufacturing of its products and subsequently passes on the costs…