,,s * a search E 13-4 Computing Profitability Ratios [L13-4, 13-51 According to

Question

,,s * a search E 13-4 Computing Profitability Ratios [L13-4, 13-51 According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment te Let' 4 percent between 2012 and 2013 s soo whether these changes ane refiected in the income statement of Computer Tycoon Inc for the year ended December 31, 2013 107 000 $130.500 Cost of Goods Sold 63.500 Selling, General, and Administrative Expenses nterest Expense Income befone Income Tax Expense Income Tax Expense 6230 17.20 4,730 11,50 1., Compto the gross proft percentage for each year (Rourd your answers to , decimal place) 1-b. Assuming that the change from 2012 to 2013 is the beginning of a sustained trend, is Computer Tycoon iely to e more or leas groas proft trom each doilar of saes O More Cross Pro 2

Explanation / Answer

1-a) GROSS PROFIT PERCENTAGE: 2012 = (56200/130500) = 43.1% 2013 = (43500/107000) = 40.7% 1-b) Less Gross Profit. 2-a) NET PROFIT MARGIN: 2012 = 11500/130500 = 8.8% 2013 = 4730/107000 = 4.4% 2-b) Worse job. Reason: The net profit margin has decreased by 4.4% whereas the gross profit margin has decreased by only 2.4%, both from 2012 to 2012. This means that the job of controlling expense has been worse. 3-a) FIXED ASSET TURNOVER: 2012 = 130500/45800 = 2.85 2013 = 107000/54900 = 1.95 3-b) 2012 4-a) RETURN ON EQUITY: 2012 = 11500/41500 = 27.7% 2013 = 4730/54700 = 8.6% 4-b) 2012

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