Ratios Analyzing Firm Profitability The following information is available for C

Question

Ratios Analyzing Firm Profitability The following information is available for Crest Company: 2015 Annual Data Sales revenue $6,600,000 $6,000,000 Cost of goods sold 4,006,400 3,800,000 Net income 2016 310,000 264,000 Year-End Data Dec. 31, 2016 Dec. 31, 2015 $2,850,000 $2,500,000 Total assets Common stockholders equity 1,900,000 1,800,000 Calculate the following ratios for 2016: Round answers to one decimal place, unless otherwise noted. a. Gross profit percentage 0 % b. Return on sales 0% c. Asset turnover (Round answer to two decimal places.) 0 d. Return on assets

Explanation / Answer

Req a; Gross profit: Sales - Cost of goods sold 6600,000 -4006,400 = 2593,600 2593600 0.39297 Gross profit margin: Ggross profit/ Sales*100 = 2593600/6600,000 *100 = 39.30% Req b: Return on sales: Net Income / Nnet sales *100 $ 310,000 /6600,000 *100 = 4.70% Req c: Assets turnover: Net sales/ Average Assets Average assets (2850,000+2500,000)/2 = 2675,000 Assets turnover: 6600,000 /2675,000 = 2.47 times Req d: Return on Assets: Net income / Average assets *100 310000 /2675,000 *100 =11.59% Req E: Return on Common Stockholder's equity: Net Income/Average Common Stockholder's equity * Average common Stockholders equity (1900,000+1800,000)/2 = $1850,000 Return on Common Stockholder's equity: 310,000 /1850,000 *100 = 16.76%

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