Need help on parts E, F, G, H Ratio proficiency McDougal Printing, Inc., had sal

Question

Need help on parts E, F, G, H

Ratio proficiency McDougal Printing, Inc., had sales totaling $43,000,000 in fiscal year 2015. Some ratios for the company are listed below. Use this information to determine the dollar values of various income statement and balance sheet accounts as requested. Assume a 365-day year. McDougal Printing, Inc. Year Ended December 31, 2015 Calculate values for the following a. Gross profits b. Cost of goods sold c. Operating profits d. Operating expenses e. Earnings available for common stockholders f. Total assets g. Total common stock equity h. Accounts receivable Sales Gross profit margin Operating profit margin Net profit margin Return on total assets Return on common equity Total asset turnover Average collection period 43,000,000 82% 39% 6% 13.2% 19% 2.2 53.7 days a. The gross profits are $ 35260000. (Round to the nearest dollar.) b. The cost of goods sold is $ 7740000. (Round to the nearest dollar.) c. The operating profits are $ 16770000. (Round to the nearest dollar.) d. The operating expenses are $ 18490000. (Round to the nearest dollar.) e. The earnings available for common shareholders are Round to the nearest dollar.)

Explanation / Answer

Please consider mn as an abbreviation for million

(e) Net Profit Margin is given as 6%. We know that Net Profit Margin = Net Profit / Sales

Substituting the given data, we get, 6% = Net Profit/ 43 mn, which is $2.58 mn. Since no other data such as preferred dividends is given, we can assume that this entire Net Profit belongs to common shareholders or common equity. Hence answer is $2,580,000.

(f) Total Asset Turnover is given. The formula for total asset turnover is Sales / Total Assets. Substituting given data, 2.2 = 43 mn / Total Assets, we get Total Assets as $19,545,454

(g) Return on common equity is given as 19%. We know the formula for Return on common equity is Net Income / Common Equity. Remember that Total Equity comprises Preferred Equity and Common Equity. Just like part (e) since no data about preferred equity is given, we can assume preferred equity to be 0. Substituting the given date in the formula,

19% = $2.58 mn / Common Equity which means Common Equity is approx $13.58 mn

(h) Account receivable days is given and also the number of days in the year is given as 365. Remember, that Average collection period is 53.7 days. The formula for accounts receivable turnover is 365 / Average collection period.

Hence , 365/53.7 = 6.8 ( approx) . Accounts receivable turnover is the number of times the company collects it's credit sales.

Accounts receivable turnover is given by Net Credit Sales / Accounts receivable. substitute the data given, 6.8 = 43 mn / Accounts receivable. This gives $ 6.32mn ( approx). Note that the assumption made here is entire sales is credit sales. The exact credit sales number is not given hence we have made this assumption

Hope it answers your questions.

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