Question

Annual Data Net sales Gross profit on sales 2019 2018 $9,000,000 $8,200,000 3,050,000 2,736,000 567,600 500,000 Net income Year-End Data Total assets Stockholders' equity Dec. 31, 2019 Dec. 31, 2018 $6,500,000 $6,000,000 5,000,000 3,200,000 Calculate the following ratios for 2019: Note: Round answers to one decimal place, unless otherwise noted. a. Gross profit percentage b. Return on sales C. Asset turnover (Round answer to two decimal places.) d. Return on assets e. Return on common stockholders' equity (Jay Company has no preferred stock.)

Answer 1

Answer- a)- Gross profit percentage = (Gross profit/Net Sales)*100

= ($3050000/$9000000)*100

= 33.9%

b)- Return on sales = (Net income/Net sales)*100

= ($567600/$9000000)*100

= 6.3%

c)- Asset turnover =Net sales/Average Total assets

=$9000000/($6000000+$6500000)/2

=$9000000/$6250000

=1.44 times

d)- Return on assets =(Net income/Average total assets)*100

={$567600/($6000000+$6500000)/2}*100

=($567600/$6250000)*100

=9.1%

e)- Return on common stockholder’s equity=Net income-Preferred dividends/Average common stockholder’s equity

= {$567600/($3200000+$5000000)/2}

= ($567600/$4100000)*100

= 13.8%