Use the following information to work the remainder of the exam: In its closing
ID: 2786275 • Letter: U
Question
Use the following information to work the remainder of the exam: In its closing financial statements for its first year of business, the Runs and Goses Company had cash of $242, accounts receivable of $850, inventory of $820, net fixed assets of $3,408, accounts payable of $700, short-term notes payable of $740, long-term liabilities of $1,100, common stock of S1,160, retained earnings of S1,620, net sales to retained earnings of $508 and dividends paid of $218. of $2,768, cost of goods sold of $1,210, depreciation of $360, interest expense of $160, taxes of $312, addition 13.) Compute the return on equity. 14) Compute the return on total assets 15.) Compute the net profit margin. 16) Compute the operating profit margin. 17) Compute the gross profit margin.Explanation / Answer
13. Return on equity = Net income/shareholder's equity
Net income = $508
shareholder's equity = Common stock + retained earnings + additions to retained earnings
shareholder's equity = 1160 + 1620 + 508
shareholder's equity = $3,288
Return on equity = 508/3288 = 15.45%
14. Return on total assets = Net income/total assets
Total assets = cash + accounts receivables + inventory + fixed assets
Total assets = 242 + 850 + 820 + 3408
Total assets = $5,320
Return on total assets = 508/5320
Return on total assets = 9.55%
15. Net profit margin = net income/sales
Net profit margin = 508/2768
Net profit margin = 18.35%
16. Operating profit margin = EBIT/sales
EBIT = Net income + tax + interest expense
EBIT = 508 + 312 + 160
EBIT = $980
Operating profit margin = 980/2768 = 35.40%
17. Gross profit margin = gross profit/sales
gross profit = Sales - cost of goods sold
gross profit = 2768 - 1210 = $1,558
Gross profit margin = 1558/2768
Gross profit margin = 56.29%