Principles of Financial Accounting.
22nd Edition
ISBN: 9780077632892
Author: John J. Wild
Publisher: McGraw Hill
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Chapter 3, Problem 19QS
To determine
Calculate the company profit margin and interpret the result.
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Damita Company reported net income of $48,025 and net sales of $425,000 for the current year. Calculate the company’s profit margin and interpret the result. Assume that its competitors earn an average profit margin of 15%.
Calculate the gross and net profits (in $) and the two profit margins (as %s) for the given company. (Round profit margins to the nearest tenth of a percent.)
Gross Profit
Margin (%)
38.43 %
Company
Net Sales
an optometry store $340,735
Cost of
Goods Sold
$209,655
$
Gross
Profit
Operating
Expenses
$83,921
Net Profit
$ 47,159
✓
Net Profit
Margin (%)
%
Evaluating Firm Profitability
The following financial information is taken from the annual reports of the Smith Company and the Wesson Company:
Smith
Wesson
Net income $10,000 $100,000
Net sales
50,000
400,000
Calculate the profit margin ratio for each company.
Note: Round answers to one decimal place, if necessary (ex: 15.4%).
Profit margin ratio
Smith
Wesson
Which company is more profitable?
Chapter 3 Solutions
Principles of Financial Accounting.
Ch. 3 - Prob. 1MCQCh. 3 - Prob. 2MCQCh. 3 - Prob. 3MCQCh. 3 - Prob. 4MCQCh. 3 - Prob. 5MCQCh. 3 - What is the difference between the cash basis and...Ch. 3 - Prob. 2DQCh. 3 - What type of business is most likely to select a...Ch. 3 - What is a prepaid expense and where is it reported...Ch. 3 - What type of assets requires adjusting entries to...
Ch. 3 - What contra account is used when recording and...Ch. 3 - Prob. 8DQCh. 3 - If a company initially records prepaid expenses...Ch. 3 - Prob. 10DQCh. 3 - Prob. 11DQCh. 3 - Samsung Assume Samsung has unearned revenue. What...Ch. 3 - Prob. 12DQCh. 3 - Prob. 1QSCh. 3 - Prob. 2QSCh. 3 - Identifying accounting adjustments Classify the...Ch. 3 - Prob. 4QSCh. 3 - Prepaid (deferred) expenses adjustments For each...Ch. 3 - Prob. 6QSCh. 3 - Prob. 7QSCh. 3 - Prob. 8QSCh. 3 - Prob. 9QSCh. 3 - Prob. 10QSCh. 3 - Prob. 11QSCh. 3 - Accrued expenses adjustments For each separate...Ch. 3 - Prob. 13QSCh. 3 - Accrued revenues adjustments For each separate...Ch. 3 - Prob. 15QSCh. 3 - Prob. 16QSCh. 3 - Prob. 17QSCh. 3 - Prob. 18QSCh. 3 - Prob. 19QSCh. 3 - Prob. 20QSCh. 3 - Prob. 1ECh. 3 - Classifying adjusting entries P1 P2 P3 P4 In the...Ch. 3 - Prob. 3ECh. 3 - Question: Determining cost flows through accounts...Ch. 3 - Prob. 5ECh. 3 - Prob. 6ECh. 3 - Prob. 7ECh. 3 - Analyzing and preparing adjusting entries P5...Ch. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 6APCh. 3 - Prob. 1BPCh. 3 - Prob. 2BPCh. 3 - Prob. 3BPCh. 3 - Prob. 4BPCh. 3 - Prob. 5BPCh. 3 - Prob. 6BPCh. 3 - Prob. 3SPCh. 3 - Prob. 1BTNCh. 3 - Prob. 2BTNCh. 3 - Prob. 5BTNCh. 3 - Prob. 7BTNCh. 3 - Prob. 9BTN
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- Calculate the gross and net profits (in $) and the two profit margins (as %s) for the given company. (Round profit margins to the nearest tenth of a percent.) Company Net Sales Cost ofGoods Sold GrossProfit OperatingExpenses Net Profit Gross ProfitMargin (%) Net ProfitMargin (%) an optometry store $327,735 $201,655 $ $83,921 $ % %arrow_forwardProfit Margin, Investment Turnover, and ROI Cash Company has income from operations of $55,704, invested assets of $211,000, and sales of $506,400. Use the DuPont formula to compute the return on investment. If required, round your answers to two decimal places. a. Profit margin b. Investment turnover c. Return on investmentarrow_forwardThe following information is available to you for the Wooden Company: 2011 2010 Net Income. 53,394 39,510 Net Sales 233,715 182,795 From the information provided, calculate Wooden’s profit margin ratio for each year. Be sure to show your calculations. 2011 2010 Comment on the results, assuming that the industry average for the profit margin ratio is 25% for each of the two years.arrow_forward
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- Franklin Corporation's balance sheet indicates that the company has $570,000 invested in operating assets. During Year 2, Franklin earned operating income of $64,980 on $1,140,000 of sales. Required a. Compute Franklin's profit margin for Year 2. b. Compute Franklin's turnover for Year 2. c. Compute Franklin's return on investment for Year 2. d. Recompute Franklin's ROI under each of the following independent assumptions: (1) Sales increase from $1,140,000 to $1,368,000, thereby resulting in an increase in operating income from $64,980 to $82,080. (2) Sales remain constant, but Franklin reduces expenses, resulting in an increase in operating income from $64.980 to $67,260. (3) Franklin is able to reduce its invested capital from $570,000 to $456,000 without affecting operating income. Complete this question by entering your answers in the tabs below. Req A to C Req D Compute Franklin's profit margin, turnover and return on investment for Year 2. Note: Round "Profit margin" and "Return…arrow_forwardGibson Corporation's balance sheet indicates that the company has $580,000 invested in operating assets. During Year 2, Gibson earned operating income of $67,280 on $1,160,000 of sales. Required a. Compute Gibson's profit margin for Year 2. b. Compute Gibson's turnover for Year 2. c. Compute Gibson's return on investment for Year 2. d. Recompute Gibson's ROI under each of the following independent assumptions: (1) Sales increase from $1,160,000 to $1,392,000, thereby resulting in an increase in operating income from $67,280 to $76,560. (2) Sales remain constant, but Gibson reduces expenses, resulting in an increase in operating income from $67,280 to $69,600. (3) Gibson is able to reduce its invested capital from $580,000 to $464,000 without affecting operating income. Complete this question by entering your answers in the tabs below. Req A to C Req D Compute Gibson's profit margin, turnover and return on investment for Year 2. Note: Round "Profit margin" and "Return on investment" to…arrow_forwardScranton Paper Company generates $.97 in sales for every $1 invested in total assets. Which one of the following ratios would reflect this relationship? Multiple Choice Receivables turnover Equity multiplier Profit margin Return on assetsarrow_forward
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