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LG P3-22 Ratio proficiency McDougal Printing, Inc., had sales totaling $40,000,0

ID: 2813211 • Letter: L

Question

LG P3-22 Ratio proficiency McDougal Printing, Inc., had sales totaling $40,000,000 in fiscal year 2015. Some ratios for the company are listed below. Use this information to determine the dollar values of various income statement and balance sheet accounts as McDougal Printing, Inc. Year Ended December 31, 2015 Sales Gross profit margin Operating profit margin Net profit margin Return on total assets Return on common equity Total asset turnover Average collection period $40,000,000 80% 35% 8% 16% 20% 62.2 days Calculate values for the following a. Gross profits b. Cost of goods sold

Explanation / Answer

a)

Gross profit margin = Gross profit / sales

0.8 = Gross profit / 40,000,000

Gross profit = $32,000,000

b)

Cost of goods sold = Sales - gross profit

Cost of goods sold = 40,000,000 - 32,000,000

Cost of goods sold = $8,000,000

c)

Operating profit margin = Operating profit / sales

0.35 = Operating profit / 40,000,000

Operating profit = $14,000,000

d)

Operating expense = Gross profit - operating profit

Operating expense = 32,000,000 - 14,000,000

Operating expense = $18,000,000

e)

Net profit margin = Earnings available to shareholders / sales

0.08 =  Earnings available to shareholders / 40,000,000

Earnings available to shareholders = $3,200,000

f)

Retrun on total assets = Net income / Total assets

0.16 = 3,200,000 / Total assets

Total assets = $20,000,000

g)

Return on common equity = Net income / total common stock equity

0.2 = 3,200,000 / total common stock equity

total common stock equity = $16,000,000

h)

Average collection period = 365 / Receivables turnover

62.2 = 365 / Receivables turnover

Receivables turnover = 5.868

Receivables turnover = Sales / Average receivables

5.868 = 40,000,000 / Average receivables

Average receivables = $6,816,632.58