enu The following financial data is from Hi-Tech instruments financial statement

Question

enu The following financial data is from Hi-Tech instruments financial statements (thousands of dollars except earnings per share.) Gross Profit Percentage 2016 Sales revenue $209,000 Cost of goods sold 126,000 Net income Dividends Earnings per share 4.15 8,300 2,600 Hi-Tech Instruments, Inc. Balance Sheet nds of Dollars) Dec. 31, 2016 Dec. 31, 2015 Assets Cash Accounts receivable (net) $18,300 $18,000 41,000 43,700 103,800 102,700 50,500 13,800 $172,000 $167,000 46,000 39,500 Total current assets Plant assets (net) Other assets 52,600 15,600 Total assets Liabilities and Stockholders Equity Notes payable-banks $6,000 $6,000

Explanation / Answer

As we know that Gross profit percentage is an important measure of determining that company is earning sufficient income available for its other operating expenditures. Comparing it with industry gives the idea that company is taking sufficient measures to control its manufacturing costs.

Gross Profit percentage = Gross Profit ÷ Sales

And Gross Profit = sales – cost of goods sold

So gross profit = $209,000 – 126,000 => $83,000

Gross profit percentage = 83000 ÷ 209,000 => 39.71% rounded to 2 decimal

Since industry average gross profit % is 42.8%, its Gross profit % is lower than industry.

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