Question

Joanne Products Ltd. reported the figures below at December​ 31, 2017, 2016​, and 2015.The business has declared bankruptcy. You have been asked to review the business and explain why it failed.

Requirement EVALLA hatred of Kannas Realty Productos results of operations during 2015 through 2017. Consider the tranda of rare, grees prodit, and net income. Track the grass profit percentage to the cecinAI PACAR) And the rate clinerary tumar tocne deciA SACAI Asch year 2015 2016 and 2017. 4 , dacus the role n ing para MIR HANA played in Icarre'a BAALS, Fred 's difficulties Firsi. 's cloudste Joanne's gross profit and grosgrohl percentage {Enter the gross profit percentage as a decimal rounded to three decimal places. Enter all other values to one decimal place) Dalars in thousands 2017 2016 2015 Casa AS Crass prott Cross prott personage Consider the line of les gross proſ and nation The babe Juegues por C a rdos telinarne Non calculate the rate of invertory turnover. (Round the average calculation to two decimal places. Round your answer to one decimal place. 2017 2016 2015 Inventory tumover The gross profit percentage sigrificantly whic the rate of inventory tumover y. This suggests that canne's Beauty Products had o t serchandise more and more just to sell the goods. The end result was a in 2017. Selling expereus significantly, wtich suggests that Jeanne's Beauty Products had to severse in order tu sal its inventory heaviy Italy ៣៧៧៧

Answer 1

Working Notes:

Sales Cost of sales Gross Profit Selling Expenses Other Expenses Net Income $ $ $ $ $ $ 2017 41.8 33.8 8.0 8.5 0.4 -0.9 $ $ $ $ $ $ 2016 39.7 31.1 8.6 7.3 1.0 0.3 $ $ $ $ $ $ 2015 37.2 28.9 8.3 6.1 0.8 1.4 $ $ $ $ $ $ Beginning Inventory Closing Inventory Average Inventory Inventory Turnover Ratio Gross Profit % 8.7 9.1 8.90 3.80 19.14% 7.0 8.7 7.85 3.96 21.66% 7.1 7.0 7.05 4.10 22.31%

The sales increased, gross profit dropped and the net income slid to a net loss.

The gross profit percentage dropped significantly while the rate of inventory turnover deteriorated. This suggests that Jones Beauty Products had to discount its merchandise more and more just to sell the goods. The end result was a net loss in 2017.

Selling Expenses increased significantly which suggest that Jones Beauty Products had to advertise heavily in order to sell its inventory.

Note: Cost of sales is considered to calculate inventory turnover ratio.