Question

Profitability Ratios

Financial statements for Remington Inc. follow.

Remington Inc.
Consolidated Statements of Income
(In thousands except per share amounts)
	2019		2018		2017
Net sales	$7,245,088		$6,944,296		$6,149,218
Cost of goods sold	(5,286,253)		(4,953,556)		(4,355,675)
Gross margin	$1,958,835		$1,990,740		$1,793,543
General and administrative expenses	(1,259,896)		(1,202,042)		(1,080,843)
Special and nonrecurring items	2,617		-		-
Operating income	$701,556		$788,698		$712,700
Interest expense	(63,685)		(62,398)		(63,927)
Other income	7,308		10,080		11,529
Gain on sale of investments	-		9,117		-
Income before income taxes	$645,179		$745,497		$660,302
Provision for income taxes	254,000		290,000		257,000
Net income	$391,179		$455,497		$403,302
Net income per share	$1.08		$1.25		$1.11

Remington Inc.
Consolidated Balance Sheets
(In thousands)
ASSETS	Dec. 31, 2019			Dec. 31, 2018
Current assets:
Cash and equivalents			$320,558			$41,235
Accounts receivable			1,056,911			837,377
Inventories			733,700			803,707
Other			109,456			101,811
Total current assets			$2,220,625			$1,784,130
Property and equipment, net			1,666,588			1,813,948
Other assets			237,392			248,372
Total assets			$4,124,605			$3,846,450
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			$250,363			$309,092
Accrued expenses			347,892			274,220
Other current liabilities			15,700			-
Income taxes			93,489			137,466
Total current liabilities			$707,444			$720,778
Long-term debt			$650,000			$541,639
Deferred income taxes			275,101			274,844
Other long-term liabilities			61,267			41,572
Total liabilities			$1,693,812			$1,578,833
Stockholders' equity:
Common and preferred stock			$189,727			$189,727
Additional paid-in capital			128,906			127,776
Retained earnings			2,397,112			2,136,794
			$2,715,745			$2,454,297
Less: Treasury stock, at cost			(284,952)			(186,680)
Total stockholders' equity			$2,430,793			$2,267,617
Total liabilities and stockholders' equity			$4,124,605			$3,846,450

Use the information provided above and below to respond to the following requirements.

Statement Item	January 1, 2018 (in thousands)
Total assets	$3,485,233
Total stockholders’ equity	2,083,122

Required:

Compute the five profitability ratios for 2018 and 2019. Round intermediate calculations and final answers to two decimal places.

	2019	2018
Gross profit percentage	%	%
Operating margin percentage	%	%
Net profit margin percentage	%	%
Return on assets	%	%
Return on equity	%	%

Answer 1

	1)
	Gross Margin Percentage
				2019	2018
	= Gross Margin/ Sales			27.04%	28.67%
				=1958835/7245088	=1990740/6944296
	2)
	Operating Margin Percentage			2019	2018
				9.68%	11.36%
	=Operating Income/ Sales			=701556/7245088	=788698/6944296
	3)
	Net Profit Margin Percentage			2019	2018
				5.40%	6.56%
	= Net Income/ Sales			=391179/7245088	=455497/6944296
	4)
	Return On Assets			2019	2018
				9.81%	12.43%
	= Net Income / Average Operating Assets
				=391179/(4124605+3846450)/2	=455497/(3485233+3846450)/2
	5)			2019	2018
	Return On Equity			16.65%	20.94%
	= Net Income / Average Shareholders Equity			=391179/(2430793+2267617)/2	=455497/(2267617+2083122)/2
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