Question

Use the statements below to answer the questions that follow:

Income Statement for the Year Ended, December 31, 2017

Sales	150,000
Expenses
Cost of Goods Sold	80,000
Operating Expenses	30,000
EBIT (aka Operating Profit)	40,000
Interest	8,000
Income Tax	13,000
Total Expenses	131,000
Net Operating Income	19,000
Other Income
Gain on Sale of Equipment	10,000
Net income	29,000

Balance Sheet

	31-Dec-17		31-Dec-16
Assets
Current Assets
Cash	95,000		78,000
Accounts Receivable	60,000		82,000
Finished Goods	25,000		50,000
Materials Inventory	110,000		80,000
Total Current Assets	290,000		290,000
Plant and Equipment
Plant and Equipment	100,000		95,000
Allowance for Depreciation	20,000		18,000
Total Plant and Equipment	80,000		77,000
Total Assets	370,000		367,000
Liabilities
Current
Accounts Payable	150,000		70,000
Notes Payable	20,000		30,000
Taxes Payable	8,000		13,000
Total Current	178,000		113,000
Long-tem
Bonds Payable	80,000		90,000
Total Liabilities	258,000		203,000
Stockholders' Equity
Common Stock	100,000		120,000
Retained Earnings	12,000		44,000
Total Equity	112,000		164,000
Total Liability and Equity	370,000		367,000

Based on the above financial statements, compute the following ratios for the year 2017:

1. Gross Profit Margin (%)

2. Operating Profit Margin (%)

3. Return on Total Assets (ROA) (%)

4. Current Ratio

Answer 1

Gross profit = Sales - Cost of goods sold = 150000 - 80000	70000
Gross profit margin (%) = Gross profit / Sales = 70000 / 150000	46.67%
Operating profit Margin (%) = Operating profit / Sales = 40000 / 150000	26.67%
Average total assets = ( Beginning total assets + Ending total assets ) / 2 = ( 367000 + 370000 ) / 2	368500
Return on total assets ( ROA ) (%) = Net income / Average total assets = 29000 / 368500	7.87%
Current ratio = Total current assets / Total current liabilities = 290000 / 178000	1.63