Question

2.Cost of goods is found on the: a.Balance sheet b. income statement c.Statement of retained earnings...

2.Cost of goods is found on the:

a.Balance sheet

b. income statement

c.Statement of retained earnings

d.none of the above

3. If Profit margin ratio is .10 and net income is 10, then shareholders equity is :

A. 100

b. 80

c.60

d.Unble to determine from data given

4.If gross profit is 20 and net sales are 100 the gross margin ratio is:

A .10

b .15

c. .20

d. .25

5. Sales less cost of goods sold yields

a. Operating income

b. EBIT

c. Gross margin

d. none of the above

Homework Answers

Answer #1

2. The answer is option “b” – income statement. In the income statement cost of goods sold is usually found below the total sales or total revenue figure.

3. Profit margin ratio = net income/sales. Here we can determine the total sales but not the shareholder’s equity. Hence the answer is “d” – unable to determine from the data given.

4. Gross margin ratio = gross profit/sales = 20/100 = 0.20

Hence answer is option “c” -0.20.

5. Sales - cost of goods sold = gross profit. From gross profit we can compute gross margin. Hence the answer is option “c” – gross margin.

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