ป 2.5 points eBook E13-4 (Algo) Computing Profitability Ratios [LO 13-4, LO 13-5] According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Inigo Peripherals for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense 2018 2017 $ 104,000 $ 126,000 62,000 73,100 42,000 52,900 36,400 37,800 540 495. 5,060 1,000 14,605 5,400 $ 4,060 $ 9,205 Net Income Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2017 to 2018 is the beginning of a sustained trend, is Inigo likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Given your calculations here and in requirement 1, explain whether Zigga did a better or worse job of controlling operating expenses in 2018 relative to 2017. 3. Inigo reported average net fixed assets of $54,600 in 2018 and $45,500 in 2017. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017? 4. Inigo reported average stockholders' equity of $54,400 in 2018 and $41,200 in 2017. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 than in 2017? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 2-a. Compute the net profit margin for each year. (Round percentage values to 1 decimal place.) 2-b. Did Inigo do a better or worse job of controlling operating expenses in 2018 relative to 2017? 2-a. 2017 2-a. 2018 % % 2-b. Controlling operating expenses in 2018 vs 2017? < Required 1 Required 3>
ป 2.5 points eBook E13-4 (Algo) Computing Profitability Ratios [LO 13-4, LO 13-5] According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Inigo Peripherals for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense 2018 2017 $ 104,000 $ 126,000 62,000 73,100 42,000 52,900 36,400 37,800 540 495. 5,060 1,000 14,605 5,400 $ 4,060 $ 9,205 Net Income Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2017 to 2018 is the beginning of a sustained trend, is Inigo likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Given your calculations here and in requirement 1, explain whether Zigga did a better or worse job of controlling operating expenses in 2018 relative to 2017. 3. Inigo reported average net fixed assets of $54,600 in 2018 and $45,500 in 2017. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017? 4. Inigo reported average stockholders' equity of $54,400 in 2018 and $41,200 in 2017. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 than in 2017? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 2-a. Compute the net profit margin for each year. (Round percentage values to 1 decimal place.) 2-b. Did Inigo do a better or worse job of controlling operating expenses in 2018 relative to 2017? 2-a. 2017 2-a. 2018 % % 2-b. Controlling operating expenses in 2018 vs 2017? < Required 1 Required 3>
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![ป
2.5
points
eBook
E13-4 (Algo) Computing Profitability Ratios [LO 13-4, LO 13-5]
According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment
fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Inigo
Peripherals for the year ended December 31, 2018.
Sales Revenue
Cost of Goods Sold
Gross Profit
Selling, General, and Administrative Expenses
Interest Expense
Income before Income Tax Expense
Income Tax Expense
2018
2017
$ 104,000
$ 126,000
62,000
73,100
42,000
52,900
36,400
37,800
540
495.
5,060
1,000
14,605
5,400
$ 4,060
$ 9,205
Net Income
Required:
1. Compute the gross profit percentage for each year. Assuming that the change from 2017 to 2018 is the beginning of a sustained
trend, is Inigo likely to earn more or less gross profit from each dollar of sales in 2019?
2. Compute the net profit margin for each year. Given your calculations here and in requirement 1, explain whether Zigga did a better
or worse job of controlling operating expenses in 2018 relative to 2017.
3. Inigo reported average net fixed assets of $54,600 in 2018 and $45,500 in 2017. Compute the fixed asset turnover ratios for both
years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017?
4. Inigo reported average stockholders' equity of $54,400 in 2018 and $41,200 in 2017. The company has not issued preferred stock.
Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 than in
2017?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Required 4
2-a. Compute the net profit margin for each year. (Round percentage values to 1 decimal place.)
2-b. Did Inigo do a better or worse job of controlling operating expenses in 2018 relative to 2017?
2-a. 2017
2-a. 2018
%
%
2-b. Controlling operating expenses in 2018 vs 2017?
< Required 1
Required 3>](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F23a70e2d-521f-4432-82d1-80f5757f6ccf%2F408f0f53-ab91-4688-b88a-e6b332170139%2F1n6bke9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:ป
2.5
points
eBook
E13-4 (Algo) Computing Profitability Ratios [LO 13-4, LO 13-5]
According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment
fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Inigo
Peripherals for the year ended December 31, 2018.
Sales Revenue
Cost of Goods Sold
Gross Profit
Selling, General, and Administrative Expenses
Interest Expense
Income before Income Tax Expense
Income Tax Expense
2018
2017
$ 104,000
$ 126,000
62,000
73,100
42,000
52,900
36,400
37,800
540
495.
5,060
1,000
14,605
5,400
$ 4,060
$ 9,205
Net Income
Required:
1. Compute the gross profit percentage for each year. Assuming that the change from 2017 to 2018 is the beginning of a sustained
trend, is Inigo likely to earn more or less gross profit from each dollar of sales in 2019?
2. Compute the net profit margin for each year. Given your calculations here and in requirement 1, explain whether Zigga did a better
or worse job of controlling operating expenses in 2018 relative to 2017.
3. Inigo reported average net fixed assets of $54,600 in 2018 and $45,500 in 2017. Compute the fixed asset turnover ratios for both
years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017?
4. Inigo reported average stockholders' equity of $54,400 in 2018 and $41,200 in 2017. The company has not issued preferred stock.
Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 than in
2017?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Required 4
2-a. Compute the net profit margin for each year. (Round percentage values to 1 decimal place.)
2-b. Did Inigo do a better or worse job of controlling operating expenses in 2018 relative to 2017?
2-a. 2017
2-a. 2018
%
%
2-b. Controlling operating expenses in 2018 vs 2017?
< Required 1
Required 3>
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education