Question

Maggie's Skunk Removal Corp.'s 2018 income statement listed net sales of $12.5 million, gross profit of $6.9 million, EBIT of $5.6 million, net income available to common stockholders of $3.2 million, and common stock dividends of $1.2 million. The 2018 year-end balance sheet listed total assets of $52.5 million and common stockholders' equity of $21 million with 2 million shares outstanding. points Calculate the gross profit margin. (Round your answer to 2 decimal places.) & 02:42:34 Gross profit margin eBook Hint Calculate the operating profit margin. (Round your answer to 2 decimal places.) Operating profit margin Print References Calculate the profit margi (Round your answer to 2 decimal places.) Profit margin Profit margin _ % Calculate the basic earnings power. (Round your answer to 2 decimal places.) Basic earnings power

Answer 1

The gross profit margin is computed as follows:

= Gross profit / net sales

= $ 6.9 million / $ 12.5 million

= 55.2%

The operating profit margin is computed as follows:

= Operating profit or EBIT / net sales

= $ 5.6 million / $ 12.5 million

= 44.8%

The profit margin is computed as follows:

= Net income / Net sales

= $ 3.2 million / $ 12.5 million

= 25.6%

The basic earnings power is computed as follows:

= EBIT / Total Assets

= $ 5.6 million / $ 52.5 million

= 10.67% Approximately

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