Question

Profitability Measures Match each computation to one of the profitability measures in the table. Profitability Measures Computations Asset turnover Return on total assets Return on stockholders' equity Return on common stockholders' equity Earnings per share on common stock $8,260,000 = [($5,785,000 + $5,595,000) = 2] → ($791,340 + $127,000) = [($6,609,000 + $6,419,000) = 2] $791,340 = [($4,079,000 + $3,875,050) = 2] ✓ ($791,340 - $65,000) = [($3,591,500 + $3,447,840) = 2] → ($791,340 - $65,000) 250,000 shares $35 = $3.05 → $175,000 = 250,000 shares $0.70 = $35 ✓ Price-earnings ratio Dividends per share Dividend yield Feedback Check My Work Look for patterns in the computations and match them to ratios that are related to each other. Identify the amounts in the computations and consider how they are related to amounts in other computations. Note that two of the computations use shares. Comparative Income Statement Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Measures part and on the Profitability Measures part. Compute any missing amounts and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only at the figure to the right of one decimal place. If < 5, round down and if > 5, round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%. Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 Sales $ % 8,260,000 4,100,000 2015 $7,267,000 (3,444,000) $3,823,000 Cost of goods sold Increase/(Decrease) Amount Percentage 993,000 13.7 656,000 19.0 337,000 l 8.8 25.0 136,000 12.3 Gross profit 4x $ Selling expenses X Administrative expenses (1,239,000) JX Total operating expenses SL Operating income $(1,453,200) (1,103,000) $(2,556,200) $1,266,800 (120,600) $1,145,200 (179,450) 127.000 6,400 Other expense (interest) Income before income tax expenses $ Income tax expense 3.3 % Net income $966,740

Answer 1

Comparative Income Statement
			Increase
	2016	2015	Amount	%
Sales	8,260,000	7,267,000	993,000	13.7%
COGS	(4,100,000)	(3,444,000)	(656,000)	19.0%
Gross profit	4,160,000	3,823,000
Selling expenses	(1,816,500)	(1,453,200)	(363,300)	25.0%
Admin Expenses	(1,239,000)	(1,103,000)	(136,000)	12.3%
Total Operating expense	(3,055,500)	(2,556,200)	(499,300)	19.5%
Operating Income	1,104,500	1,266,800	(162,300)	-12.8%
Other expense(Interest)	(127,000)	(120,600)	(6,400)	5.3%
Income before income tax	977,500	1,146,200	(168,700)	-14.7%
Income tax expense	(185,382)	(179,460)	(5,922)	3.3%
Net Income	792,118	966,740	(174,622)	-18.1%

A D 1 Comparative Income Statement Increase 2015 7267000 =B4-C4 |-3444000 =B5-C5 =C4+C5 |-1453200 =B7-C7 2016 Amount % =D4/C4 =D5/C5 3 4 Sales 8260000 |-4100000 5 COGS 6 Gross profit |=B4+B5 =D7/C7 =D8/C8 7 Selling expenses 8 Admin Expenses 9 Total Operating expense 10 Operating Income 11 Other expense(Interest) 12 Income before income tax 13 Income tax expense =C7*1.25 |-1239000 =B7+B8 |-1103000 =B8-C8 =C7+C8 =C6+C9 =D9/C9 |=B10-C10 =D10/C10 =B11-C11 =D11/C11 =C10+C11 =B12-C12 =D12/C12 =B13-C13 =D13/C13 =C12+C13 =B14-C14 =D14/C14 =B9-C9 |=B6+B9 |-127000 |-120600 |=B10+B11 =C13*103.3% |-179460 |=B12+B13 14 Net Income B.