E 13-4 Computing Profitability Ratios [L13-4, 13-51 According to the producer pr

Question

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 tell 4 8 Let's soe whelther these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2013 percent between 2012 and 2013 107 000 $130.500 Cost of Goods Sold 43.500 56.200 Selling, General, and Administrative Expenses nterest Expense Income befone Income Tax Expense Income Tax Expense Net income 8 400 6230 17.290 4.730 11,500 1-a. Compute the gross proft percentage for each year. (Round your answers to 1 decimal place ) 1-b. Assuming that the change from 2012 to 2013 is the beginning of a sustained trend, is Computer Tycoon ively to ean more or eas groas prot trom each doilar of saies

Explanation / Answer

1-a

Gross profit percentage = Gross profit / sales * 100

1-b

Less gross profit (as gross profit percentage declined)

2-a

Net profit margin = Net profit / sales * 100

2-b

Worse job (as net profit margin declined)

3-a

Fixed asset turnover = Turnover / fixed assets

3-b

2012 ( as fixed asset turnover is higher)

4-a

Return on equity = Net Income / equity * 100

4-b

No (as return on equity declined)

Gross profit percentage 2012 43.1% (56,200/130,500*100) 2013 40.7% (43,500/107,000*100)

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