Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e.,

Question

Gross margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

      

Net profit margin percentage. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

        

Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

       

Return on equity. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

       

Required: Compute the following financial data for this year: Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and company's sales are on account.

Explanation / Answer

Answer to Part 1:

Gross Profit Margin = Gross Profit / Net Sales * 100

Gross Profit = 27,000

Sales = 79,000

Gross Profit Margin = 27,000 / 79,000 *100

Gross Profit Margin = 34.2 %                              

Answer to Part 2:

Net Profit Margin = Net Profit / Net Sales * 100

Net profit = 3,540

Net Sales = 79,000

Net Profit Margin = 3540/79000 *100

Net Profit Margin = 4.5%

Answer to Part 3:

Return on Total Assets = EBIT/ Total Assets * 100

EBIT (Earning before Interest & taxes ) = 6,500

Total Assets = 50,280

Return on Assets = 6500 / 50,280

ROA = 12.9%

Answer to part 4:

Return on Equity = Net Income / Total Shareholder’s Equity

Net Income = 3,540

Total Sharehoder’s Equity = 800 (preferred Sockholding is not included)

ROE = 3540 /800

ROE = 4.4

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