Question

Maggie’s Skunk Removal Corp.’s 2015 income statement listed net sales of $13.8 million, gross profit of $8.70 million, EBIT of $6.9 million, net income available to common stockholders of $4.5 million, and common stock dividends of $2.5 million. The 2015 year-end balance sheet listed total assets of $53.8 million and common stockholders' equity of $22.3 million with 2.0 million shares outstanding.

Calculate the profit margin. (Round your answer to 2 decimal places.)

Profit margin

%

Calculate the profit margin. (Round your answer to 2 decimal places.)

Gross profit margin

%

Calculate the profit margin. (Round your answer to 2 decimal places.)

Operating profit margin

%

Calculate the basic earnings power. (Round your answer to 2 decimal places.)

Basic earnings power

%

Calculate the return on assets. (Round your answer to 2 decimal places.)

Return on assets

%

Calculate the return on equity. (Round your answer to 2 decimal places.)

Return on equity

%

Calculate the dividend payout. (Round your answer to 2 decimal places.)

Dividend payout

%

Answer 1

Answer to Part 1.:

Profit Margin = Net Income / Net Sales * 100
Profit Margin = 4,500,000 / 13,800,000 * 100
Profit Margin = 32.61%

Answer to Part 2.:

Gross Profit Margin = Gross Profit / Net Sales * 100
Gross Profit Margin = 8,700,000 / 13,800,000 * 100
Gross Profit Margin = 63.04%

Answer to Part 3.:

Operating Profit Margin = EBIT / Net Sales * 100
Operating Profit Margin = 6,900,000 / 13,800,000 * 100
Operating Profit Margin = 50%

Answer to Part 4.:

Basic Earning Power = EBIT / Total Assets * 100
Basic Earning Power = 6,900,000 / 53,800,000 * 100
Basic Earning Power = 12.83%