Question

Questions 8 thru 13 use the following information: Income Statement for the year 2005 Balance Sheet as Income Statement for the year 2006 Sales 550,000 585,000 Cost of Goods Sold 315,000 335,000 Cash AR Inventory Machinery Equipment (net) Real Estate Intellectual Property 48,000 55,000 25,000 385,000 25,500 25,000 Operating Margin 235,000 250,000 Selling, General and Administrative Expenses 85,000 83,000 Total Assets 563,500 Depreciation and Amortization of Goodwill 58,000 55,000 Interest Expense A/P Long Term Debt 68,000 210,000 42,000 41,250 Gross Profit 50,000 70,750 Total Debt 278,000 Taxes 7,500 15% 12,735 18% Equity 285,500 Net Income (earnings) 8% 58,015 563,500 42,500 15,515 102 Total Debt + Equity 20% 102 Points 8 What is the growth rate of sales? 6% 9 As a % of Sales, what change did SG&A achieve? As of S-L Did the firm change tax brackets from year to year? What is the best net profit margin for the firm? 10% 2006 12 For 2006, what is the ROE? 20% 13 For 2006, what is the ROA? 10%

please answer 9 & 10

Answer 1

9. change in SG and A	-2.35%
10. did the firm change tax brackets	yes (15% in 2005) (18% in 2006)

working:

change in SG and A i.e Selling general and administrative expenses:

83,000 -85,000 =>-2000.........(reduction in expense, so negative growth rate).

percentage change = -2000 / 85,000 *100

=>-2.3529412%

=>-2.35% (rounded to two decimals)

10. tax rate in 2005 = 7500 / 5000*100 =>15%.

tax rate in 2006 =12,735/70750*100

=>18%.

so there is a change in tax bracket.