Chapter 2: Q8BP-a (page 79)
Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.
a. What is the firm’s return on assets?
Answer
The return on assets of the company is 10%.
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a. Swank Clothiers had sales of \(383,000 and cost of goods sold of \)260,000. What is the gross profit margin (ratio of gross profit to sales)?
b. If the average firm in the clothing industry had a gross profit of 25 percent,
how is the firm doing?
Given the following information, prepare an income statement for Jonas Brothers Cough Drops.
Selling and administrative expenses | $328,000 |
Depreciation expenses | 195,000 |
Sales | 1,660,000 |
Interest expenses | 129,000 |
Cost of goods sold | 560,000 |
Taxes | 171,000 |
Prepare an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.
Sales | 1,360,000 |
Shares outstanding | 104,000 |
Cost of goods sold | 700,000 |
Interest expenses | 34,000 |
Selling and administration expenses | 49,000 |
Depreciation expenses | 23,000 |
Preferred stock dividend | 86,000 |
Taxes | 100,000 |
A-Rod Fishing Supplies had sales of \(2,500,000 and cost of goods sold of \)1,710,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,680,000. What was the firm’s operating profit?
The Haines Corp. shows the following financial data for 20X1 and 20X2:
20X1 | 20X2 | |
Sales | \(3,230,000 | \)3,370,000 |
Cost of goods sold | 2,130,000 | 2,850,000 |
Gross profits | \(1,100,000 | \)520,000 |
Selling and administrative expenses | 298,000 | 227,000 |
Operating profits | \(802,000 | \)293,000 |
Interest expense | 47,200 | 51,600 |
Income before taxes | \(754,800 | \)241,400 |
Taxes (35%) | 264,180 | 84,490 |
Income after tax | \(490,620 | \)156,910 |
For each year, compute the following and indicate whether it is increasing or
decreasing profitability in 20X2 as indicated by the ratio:
c. Interest expenses to sales
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