(Efficiency and profitability analysis) Refer to Simon Company\'s financila info
ID: 2424151 • Letter: #
Question
(Efficiency and profitability analysis)
Refer to Simon Company's financila information below. Evaluate the company's efficiency and profitability by computing the following for 2015 and 2014: (1) profit margin ratio - percent rounded to one decimal, (2) total asset turnover - rounded to one decimal, and (3) return on total assets - percent rounded to one decimal. Comment on these ratio results.
Simon Companys information:
At December 31
2013
Long-term notes payable secured by
mortgage on plant assets
$377,500
For Year ended December 31 2015 2014 sales $673,500 $532,000 Cost of goods sold $411,225 $345,500 Other operating expenses 209,550 134,980 Interest expense 12,100 13,300 Income taxes 9,525 8,845 Total cost and expenses 642,400 502,625 Net income 31,100 29,375 Earnings per share 1.90 1.80Explanation / Answer
Profit Margin Ratio
Profit Margin has decreased from 2014 to 2015
Total Asset turnover has improved over 2015
Return on total assets has declined from 2014 to 2015
Net Income / Net sales = Profit Margin Ratio 2015 31,100 6,73,500 4.6% 2014 29,375 5,32,000 5.5% Total Asset Turnover Net sales / Average total assets = Total Asset Turnover 2015 6,73,500 4,84,000 1.4 2014 5,32,000 4,11,250 1.3 Return on total assets Net Income / Average total assets = Total Asset Turnover 2015 31,100 4,84,000 6.4% 2014 29,375 4,11,250 7.1%Related Questions
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