[The following information applies to the questions displayed below.] The compar
ID: 2471373 • Letter: #
Question
[The following information applies to the questions displayed below.]
The comparative financial statements prepared at December 31, 2015, for Prince Company showed the following summarized data:
*One-third was credit sales.
Present component percentages for 2015 only. (Enter your answer as a percentage rounded to 1 decimal place (i.e. 0.123 should be entered as 12.3).)
Respond to the following for 2015: (Round your answers to 1 decimal place.)
a.
What was the gross profit percentage?
b.
What was the income tax rate?
c.
Compute the profit margin?
D. What percentage of total resources was invested in operational assets?
e.
Compute the debt-to-equity ratio?
The comparative financial statements prepared at December 31, 2015, for Prince Company showed the following summarized data:
Explanation / Answer
1
PRINCE COMPANY
Income Statement
At December 31, 2015
Component Percentages 2015
Sales revenue (the base amount)
100.0%
Cost of goods sold
59.2%
(113200/191100)
Gross profit on sales
40.8%
(77900/191100)
Operating expenses
30.0%
(57400/191100)
Pretax income
10.7%
(20500/191100)
Income taxes
3.3%
(6400/191100)
Net income
7.4%
(14100/191100)
2
PRINCE COMPANY
Balance Sheet
At December 31, 2015
Component Percentages 2015
Cash
4.1%
(4400/106900)
Accounts receivable (net)
14.2%
(15200/106900)
Inventory
39.1%
(41800/106900)
Operational assets (net)
42.6%
(45500/106900)
Total assets (the base amount)
100.0%
Current liabilities
14.0%
(15000/106900)
Long-term liabilities (10% interest)
40.6%
(43400/106900)
Common stock ($5 par)
27.9%
(29800/106900)
Retained earnings
17.5%
(18700/106900)
Total liabilities and owners' equity (the base amount)
100.0%
3
Gross Profit % =
40.8%
4
Income tax rate = Income Tax / Pretax Income = 6400/20500 =
31.2%
5
Profit margin (net)
7.4%
1
PRINCE COMPANY
Income Statement
At December 31, 2015
Component Percentages 2015
Sales revenue (the base amount)
100.0%
Cost of goods sold
59.2%
(113200/191100)
Gross profit on sales
40.8%
(77900/191100)
Operating expenses
30.0%
(57400/191100)
Pretax income
10.7%
(20500/191100)
Income taxes
3.3%
(6400/191100)
Net income
7.4%
(14100/191100)
2
PRINCE COMPANY
Balance Sheet
At December 31, 2015
Component Percentages 2015
Cash
4.1%
(4400/106900)
Accounts receivable (net)
14.2%
(15200/106900)
Inventory
39.1%
(41800/106900)
Operational assets (net)
42.6%
(45500/106900)
Total assets (the base amount)
100.0%
Current liabilities
14.0%
(15000/106900)
Long-term liabilities (10% interest)
40.6%
(43400/106900)
Common stock ($5 par)
27.9%
(29800/106900)
Retained earnings
17.5%
(18700/106900)
Total liabilities and owners' equity (the base amount)
100.0%
3
Gross Profit % =
40.8%
4
Income tax rate = Income Tax / Pretax Income = 6400/20500 =
31.2%
5
Profit margin (net)
7.4%
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