Profitability Ratios Maggie’s Skunk Removal Corp.’s 2015 income statement listed

Question

Profitability Ratios Maggie’s Skunk Removal Corp.’s 2015 income statement listed net sales of $12.5 million, gross profit of $6.9 million, EBIT of $5.6 million, net income avail- able to common stockholders of $3.2 million, and common stock dividends of $1.2 mil- lion. The 2015 year-end balance sheet listed total assets of $52.5 million and common stockholders’ equity of $21 million with 2 million shares outstanding. Calculate the gross profit margin, operating profit margin, profit margin, basic earnings power, ROA, ROE, and dividend payout. (LG3-4)

Explanation / Answer

Gross Profit Margin Gross Profit*100/ Sales 6.9*100/12.5 55.20% Operating Profit Operating Profit*100/ Sales 5.6*100/12.5 44.80% Profit Margin Proft*100/ Sales 3.2*100/12.5 25.60%

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