Using ratios to make comparisons
The following income statements were drawn from the annual reports of the Banks Company and the Stone Company.
| Banks* | Stone* |
Net sales | $90,000 | $ 80,000 |
Cost of goods sold | (54,000) | (60,000) |
Gross margin | 36,000 | 20,000 |
Less: Operating exp. |
|
|
Selling and admin, exp. | (28,800) | (14,400) |
Net income | $ 7,200 | $ 5,600 |
* All figures are reported in thousands of dollars.
Required
a. One of the companies is a high-end retailer that operates in exclusive shopping malls. The other operates discount stores that are located in low-cost, stand-alone buildings. Identify the high-end retailer and the discounter. Support your answer with appropriate ratios.
b. If Banks and Stone have equity of $102,000 and $65,900, respectively, which company is in the more profitable business?
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