### Dulaney’s Stores Yearly Financial Overview#### Earnings and Expenses (Year Ending January 2019)- **Sales:** $50,000,000- **Cost of Goods Sold (COGS):** $30,000,000- **Pretax Earnings:** $5,000,000#### Selected Balance Sheet Items- **Merchandise Inventory:** $2,500,000- **Total Assets:** $8,000,000#### Analytical Questionsa. (*) What is Dulaney’s current profit margin? What is its current yearly Return on Assets (ROA)?b. (**) Suppose COGS and merchandise inventory were each cut by 10%. What would be the new pretax profit margin and ROA?c. (**) Based on the current profit margin, how much additional sales would Dulaney have to generate in order to have the same effect on pretax earnings as a 10% decrease in merchandise costs?

Given in the question: Sales $50,000,000 Cost of Goods Sold $30,000,000 Pre-tax…

a. (*) What is Dulaney's current profit margin? What is its current yearly ROA? b. (**) Suppose COGS and merchandise inventory were each cut by 10%. What would be the new pretax profit margin and ROA? c. (**) Based on the current profit margin, how much additional sales would Dulaney have to generate in order to have the same effect on pretax earnings as a 10% decrease in merchandise costs?

a. (*) What is Dulaney's current profit margin? What is its current yearly ROA? b. () Suppose COGS and merchandise inventory were each cut by 10%. What would be the new pretax profit margin and ROA? c. () Based on the current profit margin, how much additional sales would Dulaney have to generate in order to have the same effect on pretax earnings as a 10% decrease in merchandise costs?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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