You are given the following information for Smashville, Inc. Cost of goods sold:
ID: 2731313 • Letter: Y
Question
You are given the following information for Smashville, Inc. Cost of goods sold: $ 174,000 Investment income: $ 1,400 Net sales: $ 379,000 Operating expense: $ 86,000 Interest expense: $ 7,400 Dividends: $ 8,000 Tax rate: 40 % Current liabilities: $ 21,000 Cash: $ 21,000 Long-term debt: $ 46,000 Other assets: $ 38,000 Fixed assets: $ 130,000 Other liabilities: $ 3,000 Investments: $ 34,000 Operating assets: $ 64,000 Calculate the gross margin, the operating margin, return on assets, and return on equity. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Gross margin % Operating margin % Return on assets % Return on equity %Explanation / Answer
Net Sales 379000 Less : Cost of goods sold 174000 Gross Profit 205000 Less : operating expense 86000 operating Income 119000 Add : Investment Income 1400 Total Income 120400 Less Interest Expense 7400 Net Income before tax 113000 Tax @ 40% 45200 net income 67800 Gross Margin = Gross Profit / Net sales * 100 = 205000 / 379000 * 100 = 54.09% operating margin ratio = operating income / net sales * 100 = 119000 / 379000 * 100 = 31.40% Total Assets = liabilities + stockholders equity 21000 + 38000 + 130000 + 34000 + 64000 = 21000+ 46000 + 3000 + stockholders equity stockholders equity =287000 - 70000 = 217000 Return on assets = Net Income / Total Assets = 67800 / 287000 * 100 = 23.62% Return on equity = Net Income / stockholders equity * 100 = 67800 / 217000 * 100 = 31.24%
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