Mercedes, Co. has the following quarterly financial information. 4th Quarter 3rd
ID: 2592320 • Letter: M
Question
Mercedes, Co. has the following quarterly financial information. 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter $927,800 $937,300 $935,600 $943,400 305,800 318,400 318,000 323,200 249,000 260,400 258,600 262,700 4,150 88,500 91,000 Average number of common shares outstanding 799,530 794,564 796,170 809,500 Sales revenue Cost of goods sold Operating expenses Interest expense Income tax expense 4,250 85,600 4,250 88,500 4,250 Stock price when Q4 EPS released $ 24 a. Calculate the gross profit percentage for each quarter. (Do not round your intermediate calculations and round your final answer to 2 decimal places.) Q4 Q3 Q2 Q1 Gross Profit Percentage b. Calculate the net profit margin for each quarter. (Do not round your intermediate calculations and round your final answer to 2 decimal places.) Q4 Q3 Q2 Q1 Net Profit Margin c. Calculate the EPS for each quarter. (Do not round your intermediate calculations and round your final answer to 2 decimal places.) Q4 Q3 Q2 Q1 EPSExplanation / Answer
Solution:
a) Calculation of Gross Profit Percentage
Q4
Q3
Q2
Q1
Sales Revenue
927800
937300
935600
943400
Cost of Goods Sold
305800
318400
318000
323200
Gross Profit (Sales - Cost of Goods Sold)
622000
618900
617600
620200
Gross Profit Percentage (Gross Profit / Sales x 100)
67.04%
66.03%
66.01%
65.74%
b) Calculation of Net Profit Margin for each quarter
Q4
Q3
Q2
Q1
Gross Profit as calculated in Part (a)
622000
618900
617600
620200
Total Expenses:
Operating Expenses
249000
260400
258600
262700
Interest Expenses
4250
4250
4250
4150
Income Tax Expenses
85600
88500
88500
91000
Total Expenses
338850
353150
351350
357850
Net Profit (Gross Profit - Total Expenses)
283150
265750
266250
262350
Net Profit Margin (Net Profit / Sales x 100)
30.52%
28.35%
28.46%
27.81%
c) Calculation of EPS for Each Quarter
Net Profit (as calculated in part (b)
$283,150
$265,750
$266,250
$262,350
Average number of common shares outstanding
799530
794564
796170
809500
EPS (Net Profit attributable to Common Stockholders / Average Number of Common Shares Outstanding)
$0.35
$0.33
$0.33
$0.32
d) Calculation of Price / Earnings Ratio
Stock Price Q4
$24
EPS of Quarter 4
$0.35
Price/Earnings Ratio (Stock Price Q4 / EPS of Q4)
68.57
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a) Calculation of Gross Profit Percentage
Q4
Q3
Q2
Q1
Sales Revenue
927800
937300
935600
943400
Cost of Goods Sold
305800
318400
318000
323200
Gross Profit (Sales - Cost of Goods Sold)
622000
618900
617600
620200
Gross Profit Percentage (Gross Profit / Sales x 100)
67.04%
66.03%
66.01%
65.74%
b) Calculation of Net Profit Margin for each quarter
Q4
Q3
Q2
Q1
Gross Profit as calculated in Part (a)
622000
618900
617600
620200
Total Expenses:
Operating Expenses
249000
260400
258600
262700
Interest Expenses
4250
4250
4250
4150
Income Tax Expenses
85600
88500
88500
91000
Total Expenses
338850
353150
351350
357850
Net Profit (Gross Profit - Total Expenses)
283150
265750
266250
262350
Net Profit Margin (Net Profit / Sales x 100)
30.52%
28.35%
28.46%
27.81%
c) Calculation of EPS for Each Quarter
Net Profit (as calculated in part (b)
$283,150
$265,750
$266,250
$262,350
Average number of common shares outstanding
799530
794564
796170
809500
EPS (Net Profit attributable to Common Stockholders / Average Number of Common Shares Outstanding)
$0.35
$0.33
$0.33
$0.32
d) Calculation of Price / Earnings Ratio
Stock Price Q4
$24
EPS of Quarter 4
$0.35
Price/Earnings Ratio (Stock Price Q4 / EPS of Q4)
68.57