Marovich Corporation has provided the following financial data: Year 2 Year 1 To

Question

Marovich Corporation has provided the following financial data: Year 2 Year 1 Total assets $1,332,000 $1,300,000 Common stock, $4 par value $200,000 $200,000 Total stockholders' equity $1,042,000 $1,010,000 Dividends on common stock during Year 2 totaled $4,000. The market price of common stock at the end of Year 2 was $6.41 per share. Required: Show all Work! a. What is the company's net profit margin percentage for Year 2? b. What is the company's gross margin percentage for Year 2? c. What is the company's return on total assets for Year 2? (Use Net Operating Income for this calculation) d. What is the company's return on equity for Year 2? e. What is the company's earnings per share for Year 2? f. What is the company's book value per share at the end of Year 2? Income Statement For the Year Ended December 31, Year 2 Sales (all on account) $1,230,000 Cost of goods sold 810,000 Gross margin 420,000 Operating expenses 355,615 Net operating income 64,385 Interest expense 9,000 Net income before taxes 55,385 Income taxes (35%) 19,385 Net income $36,000

Explanation / Answer

a Answer :- Net Profit Margin percentage = Net Income ÷ Sales

= ($36,000 ÷ $1,230,000) × 100 = 2.93%

b Answer :- Gross Margin Perecentre = Gross margin ÷ Sales

= ($420,000 ÷ $1,230,000) ×100 = 34.15%

c Answer :- Return on Total assets = Adjusted Total Income ÷ Average Total Assets

=( $41850 ÷ $1316000) × 100 = 3.18%

Adjusted Net Income = Net Income + [ Interest Expense × (1-Tax Rate)]

= $36,000 + [9000 × (1-0.35)]

= $36000 + $5850 = $41850

Average Total assets = ($1332000 + 1300000)/2 = $1316000

d Answer :- Return on Equity = Net Income + Averge stockholders equity

= ($36000 ÷ $1026000) × 100 = 3.51% (rounded)

Average stockholders equity = ($1042000 + $1010000)/2 = $1026000

e Answer :- Earnings Per share = Net Income ÷ Average Number of common shares outstanding

= $36000 ÷ 50000 shares = $0.72 per share

Number of common shares outstanding = Common stock ÷ par value

= $200,000 ÷ $4 = 50000 shares outstanding

f Answer :- Book Value per share = Common Stockholders equity ÷ Number of common shares outstanding

Book valureviews per share = $1010000 ÷ 50000 shares = $20.2

Number of common shares outstanding = Common stock ÷ par value

= $200,000 ÷ $4 = 50000 shares

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