Interest Coverage Ratio Return on asset Return on equity
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 3Q: Explain how a contribution margin income statement can be used to determine profitability.
Related questions
Question
NOTE: ANSWER THE HIGHLIGHTED ONES ONLY
pls compare the year 2019 & 2018 and provide an interpretation THANK YOU SO MUCH! GODBLESS!
![VII. Direction: Compute and interpret.
The following comparative financial statements are provided by Avatar Industries. You were asked
to compute the different financial ratios and provide your interpretations with regards to
profitability, efficiency, liquidity and solvency of the company. Use the Answer Sheet template
below to input your answer and solution.
AVATAR INDUSTRIES
AVATAR INDUSTRIES
Comparative Statement of Financial Position
For the years 2019 and 2018
Comparative Income Statement
For the years 2019 and 2018
2019
2018
2019
2018
ASSETS
Current Assets:
Sales
P200,000
P210,000
Cash & Cash Equivalent
P65,000
P70,000
Sales Returns and Allowances
40,000
25,000
Accounts Receivable
40,000
35,000
Net Sales
160,000
185,000
Marketable Secuities
40,000
35,000
Cost of Goods Sold
100,000
115,625
Inventory
100,000
80,000
Gross Profit
60,000
69,375
Total Current Assets
220,000
200,000 160,000
P445,000 P380,000
245,000
Operating Expenses:
Fixed Assets
Selling Expenses
22,000
25,000
Total Assets
General Expenses
8,000
12,000
Income from Operations
30,000
32,375
LIABILITIES
Non-operating Income
6,000
2,500
Current Liabilities
P110,800 P105,000
Income before Interest Expense
36,000
34,875
Interest Expense
Long-term liabilities
Total Liabilities
160,000
145,000
4,000
3,500
270,800
250,000
Net Income
P32,000
P31,375
Owner's Equity
174,200
130,000
Total Liabilities & Equity
P445,000 P380,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9709ba89-8ebc-4d99-bc06-b12009c514bf%2F6e0d1953-6853-485d-8a63-fcd8f4479bc2%2Fuzqwxxv_processed.png&w=3840&q=75)
Transcribed Image Text:VII. Direction: Compute and interpret.
The following comparative financial statements are provided by Avatar Industries. You were asked
to compute the different financial ratios and provide your interpretations with regards to
profitability, efficiency, liquidity and solvency of the company. Use the Answer Sheet template
below to input your answer and solution.
AVATAR INDUSTRIES
AVATAR INDUSTRIES
Comparative Statement of Financial Position
For the years 2019 and 2018
Comparative Income Statement
For the years 2019 and 2018
2019
2018
2019
2018
ASSETS
Current Assets:
Sales
P200,000
P210,000
Cash & Cash Equivalent
P65,000
P70,000
Sales Returns and Allowances
40,000
25,000
Accounts Receivable
40,000
35,000
Net Sales
160,000
185,000
Marketable Secuities
40,000
35,000
Cost of Goods Sold
100,000
115,625
Inventory
100,000
80,000
Gross Profit
60,000
69,375
Total Current Assets
220,000
200,000 160,000
P445,000 P380,000
245,000
Operating Expenses:
Fixed Assets
Selling Expenses
22,000
25,000
Total Assets
General Expenses
8,000
12,000
Income from Operations
30,000
32,375
LIABILITIES
Non-operating Income
6,000
2,500
Current Liabilities
P110,800 P105,000
Income before Interest Expense
36,000
34,875
Interest Expense
Long-term liabilities
Total Liabilities
160,000
145,000
4,000
3,500
270,800
250,000
Net Income
P32,000
P31,375
Owner's Equity
174,200
130,000
Total Liabilities & Equity
P445,000 P380,000
![PROFITABILITY
Solution and answer
Interpretation
Gross profit margin
Operating profit margin
Net profit margin
Interest Coverage Ratio
Return on asset
Return on equity](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9709ba89-8ebc-4d99-bc06-b12009c514bf%2F6e0d1953-6853-485d-8a63-fcd8f4479bc2%2Fyk8dtcr_processed.png&w=3840&q=75)
Transcribed Image Text:PROFITABILITY
Solution and answer
Interpretation
Gross profit margin
Operating profit margin
Net profit margin
Interest Coverage Ratio
Return on asset
Return on equity
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
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
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
![Auditing: A Risk Based-Approach (MindTap Course L…](https://www.bartleby.com/isbn_cover_images/9781337619455/9781337619455_smallCoverImage.gif)
Auditing: A Risk Based-Approach (MindTap Course L…
Accounting
ISBN:
9781337619455
Author:
Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:
Cengage Learning
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)