The following selected data was retrieved from the Walmart, Inc. financial state

Question

The following selected data was retrieved from the Walmart, Inc. financial statements for the year ending January 31, 2013. Accounts Payable $38,080 Accounts Receivable 6,768 Cash 7,781 Common Stock 3,952 Cost of Goods Sold 352,488 Income Tax Expense 7,981 Interest Expense 2,064 Membership Revenues 3,048 Net Sales 466,114 Operating, Selling and Administrative Expenses 88,873 Retained Earnings 72,978 Required: 1: Using the information provided above, prepare a multiple-step income statement. 2: Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings and results. (Points : 36)

Explanation / Answer

Answer:

1) MULTIPLE STEP INCOME STATEMENT Sales - Net 466114 Less cost of goods sold 352488 Gross profit 113626 Less: Operating, selling and Administrative Exp 88873 Operating Profit 24753 Other Revenues: Membership revenues 3048 27801 Other Expenses: Interest Expense 2064 Profit before tax 25737 Income tax expense 7981 Profit after tax 17756 2) Gross Profit Rate = Gross Profit/ Net Sales= 113626/466114 24.38 % Profit Margin = Net Profit/Net Sales=17756/466114 3.81 % The ratios show that the company earns a gross margin of nearly 25% on its sales. But, its profit margin is very low at 3.81%, indicating tht the operating and other expenses are very high compared to the Net Sales.

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