Question

Cost of Goods Sold Cross Profit Selling General, and sinistra Income before Income Tax Expe Income Tax Expense Net Tato Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2015 to 2016 is the beginning of a sustained trend, is Computer Tycoon likely to earn more or less gross profit from each dollar of sales in 2017? 2. Compute the net profit margin for each year. Given your calculations here and in requirement explain whether Computer Tycoon did a better or worse job of controlling operating expenses in 2016 relative to 2015. 3. Computer Tycoon reported average netfied assets of $54,200 in 2016 and $45100 in 2015. Compute the foxed asset turnover ratios for both years. Did the company better utilize its investment in feed assets to generate revenues in 2016 or 2015 4. Computer Tycoon reported average stockholders' equity of $54,000 in 2016 and $40.800 in 2015. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2016 than in 2015? Complete this question by entering your answers in the t Reed 1 Regred2 R ed 3 1-a. Compute the gross profit percentage for each year. (Round our answers to 1 dedimal place.) 1-b. Assuming that the change from 2015 to 2016 is the beginning of a sustained trend, is Computer Tycoon likely to earn more or less gross profit from each dollar of sales in 2017? Gross Pront 2015 < Prev 2 of 4 !! Next >

Answer 1

1)

1-a)

Gross profit percentage	(Gross profit/Sales)*100%
	2015	2016
Gross profit	$            48,500	$     40,000
Sales	$        1,20,000	$ 1,00,000
Gross profit percentage	40.4%	40.0%

1-b) Likely to earn in 2017 ? - Less gross profit

2)

Net profit margin	(Net Income/Sales)*100%
	2015	2016
Net Income	$              6,025	$        2,500
Sales	$        1,20,000	$ 1,00,000
Net profit margin	5.0%	2.5%

2-b) Controlling operating expenses in 2016 vs 2015 - Worst job

3)

3-a)

Fixed assets turnover ratio	(Net sales/Average fixed assets)*100%
	2015	2016
Net sales	$        1,20,000	$ 1,00,000
Average fixed assets	$            45,100	$     54,200
	266.08%	184.50%

3-b)

Investment better utilized in 2015.

Since the ratio of fixed assets turnover is more in 2015 (266.08%) compared to 2016 (184.50), Investment in assets better utilized in 2015.

4)

4-a)

	2015	2016
Net Income	$              6,025	$        2,500
Shareholders' equity	$            40,800	$     54,000
Gross profit percentage	14.8%	4.6%

4-b)

The company has generated grater returns in 2016 - No