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Chapter 2: 8BP c (page 79)
Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.
c. If the firm has an asset turnover ratio of 2.5 times, what is the profit margin
(return on sales)?
The profit margin of the company is 4%.
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Perez Corporation has the following financial data for the years 20X1 and 20X2:
20X1 | 20X2 | |
Sales | \(8,000,000 | \)10,000,000 |
Cost of goods sold | 6,000,000 | 9,000,000 |
Inventory | 800,000 | 1,000,000 |
a. Compute inventory turnover based on Ratio 6, Sales/Inventory, for each year.
Elizabeth Tailors Inc. has assets of $8,940,000 and turns over its assets 1.9 times per year. Return on assets is 13.5 percent. What is the firm’s profit margin (returns on sales)?
Perez Corporation has the following financial data for the years 20X1 and 20X2:
20X1 | 20X2 | |
Sales | \(8,000,000 | \)10,000,000 |
Cost of goods sold | 6,000,000 | 9,000,000 |
Inventory | 800,000 | 1,000,000 |
c. What conclusions can you draw from part a and part b?
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
The total assets for this company equal \(80,000. Set up the equation for the Du Pont system of ratio analysis, and compute c, d, and e.
c. Profit margin.
Times mirror and glass company | |
Sales | \)126,000 |
Less: Cost of goods sold | 93,000 |
Gross profit | \(33,000 |
Less: selling and administrative expenses | 11,000 |
Lease Expenses | 4,000 |
Operating profit* | \)18,000 |
Less: Interest expenses | 3,000 |
Earning before taxes | \(15,000 |
Less: Taxes (30%) | 4,500 |
Earning after taxes | \)10,500 |
*equal income before interest and taxes
Classify the following balance sheet items as current or noncurrent:
Retained earning | Bond payable |
Accounts payable | Accrued wages payable |
Prepaid expenses | Accounts receivable |
Plant and equipment | Capital in excess of par |
Inventory | Preferred stock |
Common stock | Marketable security |
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