Question

Suppose in its income statement for the year ended June 30, 2022, The Clorox Company reported the following condensed data (dollars in millions).

Salaries and wages expenses		$ 449		Research and development expense		$ 109
Depreciation expense		90		Income tax expense		275
Sales revenue		5,619		Loss on disposal of plant assets		46
Interest expense		156		Cost of goods sold		3,060
Advertising expense		489		Rent expense		102
Sales returns and allowances		266		Utilities expense		57

Calculate the gross profit rate and the profit margin. (Round answers to 1 decimal place, e.g. 15.2%.)

Gross profit rate		enter gross profit rate in percentages rounded to 1 decimal place	%
Profit margin		enter profit margin in percentages rounded to 1 decimal place	%

Answer 1

Particulars	Amount (in $ millions )	Amount (in $ millions )
Sales revenue		$ 5,619
Less: Sales return and allowance		($ 266)
Net Sales		$ 5,353
Less: Cost of goods sold		($ 3,060)
Gross profit		$ 2,293
Less: Operating expenses
- Salaries and wages expenses	$ 449
- Depreciation expense	$ 90
- Advertising expense	$ 489
- Research and development expense	$ 109
- Rent expense	$ 102
- Utilities expense	$ 57
Total Expense		($ 1,296)
Operating income		$ 997
Other Revenue and Expense :
- Loss on Disposal of Plant Assets	($ 46)
- Interest expense	($ 156)	($ 202)
Income before tax		$ 795
Less: Income tax expense		($ 275 )
Net income (or) Net Profit Margin		$ 520
Gross profit rate         =   Gross profit / Net Sales         =    $ 2,293 / $ 5,353	42.8%
Profit margin         =   Net Profit Margin/ Net Sales         =    $ 520 / $ 5,353	9.7%