Question

2019/2020 Student Name: Student Number: Flingers Inc. reveals the following information in their annual report for FY 2018 Earnings and Expenses Sales Cost of goods sold Pretax earnings $10,000,000 $5,000,000 $500,000 Selected Balance Sheet Items Merchandise inventory Total assets $80,000 $2,000,000 1. What is Flingers' return on assets? A) 16% B) 20% C) 25% D) 40% 2. What is Flingers' profit margin? A) 5% B) 16% C) 2% D) 4% 3. Every dollar Flingers saves in purchasing has the same impact as what amount of increased sales? A) $10 B) $14 C) $17 D) $20 4. Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales. What will Flingers' return on assets figure be for 2018 A) 26% B) 29% C) 33% D) 38% 5. Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales. What will Flingers' profit margin be for 2018

Answer 1

Giver Sales = $10,000,000 Cost of goods sold = $5,000,000 Gross Income - Sales - Cost of goode sold = $10,000,000 $5,000,000 - $ 5.000.000 Given, Pretax earnings = $5,00,000. Pretax Earrings & Gross Income - Operating Expense $ 500,000 = $5,000,000 - Operating expenses $ 500,000 - $5,000,000 - - Operating Expense - $4,500,000 = - Operating Expensee → Operating Expenses = $4500,000.

1. Option C - 25% 2. Option A - 5%

  

1. Flingers Formula Return on for Return on Assets Ascets - Pretar Earnings x 100 Total Assets $ 500.00° x100 $2,000,000 95%. 2. Flingers Profit Formula for profit = Margin Net Margin = X 100 Income for Pretax earnings Net Sales $ 500,000 X 100 $ 10,000,000 5%. =

3. Option D - $20

3.) Operating profit con Pretax earrings = $50,000. Sales = $ 10,000,000 Operating profit percentage - Operating profit x sales Xloo $ 500,000 x100 $topoo,000 = $ 5% (or 0.05 for every dollar that the company saves sl. goes, to operating profit. A dollar saved in purchasing = $1 0.05 = $ 20.

4. Option D - 38%

100 4). If management plans to cut cost of goods, sold by 5% , and sales remains the same. cost of goods sold (present) - $5,000,000 cost of goods sold (after the cut) = = $ 5,000,000 - $5,000,000* 5 - $ 5,000,000 - $ 950,000 - $ 4,750,000 Gross Income = sales - Coct of goods sold. = $10,000,000 - $ 4,750,000 = $ 5,250,000 Net Income or) Pretax eamings = Gross Income - Operating Expenses = $5,250,000 - $ 4,500,000 - $ 450,000 'Flingers return on Assets for 2018 Pretax earnings x100 Total Assets $ 450,000 x100 $ 2000,000 = 31.5% - 38% (approximately).