Question

Return on Assets Net Sales Gross Profit Margin Cost of Goods Operating Net Profit Before Tax PI Expense Accounts Receivable Return On Assets + Merchandise Inventory Total Current Assets Asset Turnover Cash Total Assets Fixed Assets Other Current Assets Use the charts on the following page to calculate Net Profit Margin % for each scenario: Scenario 1 Scenario 2 Income Statement Income Statement Sales Sales Gross Sales $200,000 Gross Sales $100,000 Promotional Allowances $25,000 Promotional Allowances $15,000 Customer Returns -$15,000 Customer Returns $10,000 Total Net Sales $210,000 Total Net Sales $105,000 Cost of Goods Sold Cost of Goods Sold COGS $150,000 COGS $60,000 Total COGS $150,000 Total COGS $60,000 Gross Margin $60,000 Gross Margin $45,000 Expenses Expenses Selling, General & Administrative $35,000 Selling, General & Administrative $20,000 Financing $1,200 Financing $700 Total Expenses $36,200 Total Expenses $20,700 Net Profit Before Tax (EBT) $23,800 Net Profit Before Tax (EBT) $24,300 Tax Rate 30% $7,140 Tax Rate 30% $7,290 Total Taxes $7,140 Total Taxes $7,290 Net Profit After Tax $16,660 Net Profit After Tax $17,010

Answer 1

Scenario 1 210000 (Net Sales) 60000 (Gross Profit Margin) 150000 (Cost of Goods sold) 23800 (Net Profit before tax) 35000 (Operating expenses) 16660 (Net Profit after taxes) 36200 7140 7.93% (Total expenses) (Taxes) (Net Profit Margin) 210000 1200 (Interest expense) (Net Sales) The Net Profit margin for Scenario 1 is 7.93%.

Scenario 2 105000 (Net Sales) 45000 (Gross Profit Margin) 60000 (Cost of Goods 24300 sold) (Net Profit before tax) 20000 (Operating expenses) 17010 (Net Profit after taxes) 20700 7290 16.20% (Total expenses) (Taxes) (Net Profit Margin) 105000 700 (Interest expense) (Net Sales) The Net Profit margin for Scenario 2 is 16.20%.