Question

# Analyze sales for 2015, 2016, and 2017. Calculate any profit measures deemed necessary and discuss the...

Analyze sales for 2015, 2016, and 2017.

Calculate any profit measures deemed necessary and discuss the profitability of the company.

ABC Company

Income Statements

For the Years Ended Dec. 31, 2017, 2016 and 2015

2017                 2016              2015

Net sales                                                                       \$174                 \$167                \$160

COGS                                                                           (114)               (115)               (120)

Gross profit                                                                   \$ 60                 \$ 52                 \$40

General and administrative expenses (54)                  (46)               (34)

Operating profit                                                              \$ 6                 \$ 6                  \$ 6

Interest expense (1)                   (1)                   (1)

Gain from sales of assets -                       10                     -

Income taxes (2)                   (6)                    (2)

Net income                                                                   \$3                \$ 9 \$3

Deemed Profit measures: Year-wise measures

1. Gross profit margin ratio = Gross profit / Sales * 100 2017 2018 2019

= 60 / 174 * 100 52 / 167 * 100 40 / 160 * 100

=    34.48% 31.14% 25%

2. Operating profit margin ratio = Operating profit / Sales * 100

= 6 / 174 * 100 6 / 167 * 100    6 / 160 * 100

= 3.45% 3.59% 3.75%

3. Net Profit margin ratio = Net income / Sales * 100

= 3 / 174 * 100 9 / 167 * 100 3 / 160 * 100

= 1.72% 5.39% 1.88%