ll year. Rates above 2.8 percent are considered good o cturers of pollution cont

Question

ll year. Rates above 2.8 percent are considered good o cturers of pollution controls; rates above 6.4 percent are considered very good) c. Comment on the results of your analysis. ges in Various Ratios Presented below is selected information for Brimmer Company 13-5A. Change 2016 2015 Sales revenue... Cost of goods sold. $920,000 $840.000 575,000 545000 Interest expense... Income tax expense.···· Net income 20,000 20,000 27,000 30,000 61,000 52.000 65,000 55,000 45.000 45.000 126,000 120,000 196,000 160,000 450,000 400,000 750,000 675,000 Cash flow from operating activities … … Capital expenditures Accounts receivable (net), December 31 Inventory, December 31 Stockholders' equity, December 31 Total assets, December 31. Required a. Calculate the following ratios for 2016. The 2015 results are given for comparative purposes. 2015 … 33.5 percent 8.3 percent 6.2 percent 1. Gross profit percentage... 2 Return on assets . . Return on sales Return on common stockholders' equity (no preferred stock was outstanding) 4. 13.9 percent 7.50 48.7 days 3.61 5. Accounts receivable turnover 6. Average collection period. 7. Inventory turnover . 8. Times-interest-earned ratio 4.80 1.22 b. Comment on the changes between the two years.

Explanation / Answer

2016 1 Gross profit percentage gross profit * 100 net sales = (sales - cost of goods sold)*100 net sales = (920000-575000)*100 920000 = 37.5 gross profit percentage has increased from 33.5% to 37.5% in 2016 which indicates that the company is very efficient. 2 return on assets earnings total assets 61000 *100 750000 8.133333 return on assets has declined from 8.3% to 8.13% in 2016 which indicates that the company 's management is efficient in using its assets to generate earnings. 3 return on sales net income net sales 61000 920000 6.630435 return on sales has increased from 6.63% to 6.2% in 2016 which indicates that how efficient a company is at generating profits from its revenue. 4 return on common stockholders equity net income stockholder's equity 61000 450000 13.55556 return on common stockholder's equity declined from 13.9% to 13.56% which indicates that company is not efficient in generating income available for common stockholders. 5

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