Flingen Inc. reveals the following information in their annual report for FY 2021Selected Income Statement Items:Sales$9,000,000Cost of goods sold$5,000,000Pretax earnings$500,000Selected Balance Sheet Items:Merchandise inventory$80,000Total assets$2,000,000What is Flingen's projected profit margin for 2022, assuming they plan to reduce cost of goods sold by 5.0% for the coming year while maintaining the same sales revenue? (Please round answer to nearest whole percentage).Group of answer choices9%10%8%7%

Profit margin is calculated by net income by net sales revenue. Gross profit is the difference between net sales revenue and cost of goods sold. Net income is the difference between gross profit and selling and administrative expenses. Gross profit= Sales — Cost of goods sold = $9,000,000 — $5,000,000= $4,000,000Selling and administrative expenses= Gross profit — Pretax earnings= $4,000,000 — $500,000= $3,500,000New cost of goods sold = Cost of goods sold × (1 — 5%)= $5,000,000 × 0.95 = $4,750,000New gross profit = Sales revenue — New cost of goods sold = $9,000,000 — $4,750,000= $4,250,000 New pretax earnings = New gross profit — Selling and Administrative expenses= $4,250,000 — $3,500,000= $750,000Profit margin for 2022 = (New pretax earnings ÷ Sales)×100 = ($750,000÷$9,000,000)×100 = 8% Requirement #:—Hence, profit margin for 2022 is 8%OPTION C is correct.

Answered: Flingen Inc. reveals the following…

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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Flingen Inc. reveals the following information in their annual report for FY 2021

Selected Income Statement Items:

Sales	$9,000,000
Cost of goods sold	$5,000,000
Pretax earnings	$500,000

Selected Balance Sheet Items:
Merchandise inventory	$80,000
Total assets	$2,000,000

What is Flingen's projected profit margin for 2022, assuming they plan to reduce cost of goods sold by 5.0% for the coming year while maintaining the same sales revenue? (Please round answer to nearest whole percentage).

Group of answer choices

10%

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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