Profitability AnalysisErin Enterprises reports the following information on its year-end income statement:Net Sales$200,000Operating Expenses$40,000Cost of Goods Sold110,000Other Income25,000 RequiredCalculate Erin’s gross profit percentage and return on sales ratio.(Round answer to one decimal place.)Gross profit percentage =Answer Return on sales ratio =Answer

Gross profit percentage is calculated by dividing gross profit by net sales. Gross profit is the difference between sales revenue and cost of goods sold. Return on sales ratio is calculated by dividing net income by net sales.Net sales$200,000Less:- Cost of goods sold$110,000Gross profit $90,000Less:- Operating expenses $40,000Operating income $50,000Add:- Other income & other (losses)$25,000Net income $75,000Gross profit percentage= Gross profit ÷ Net sales = ($90,000 ÷ $200,000)×100 = 45%Return on sales ratio = Net income ÷ net sales revenue = ($75,000 ÷ $200,000)×100 = 37.5%Requirement #:—Gross profit percentage = 45%Return on sales ratio = 37.5%

Answered: Profitability Analysis Erin…

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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Profitability Analysis

Erin Enterprises reports the following information on its year-end income statement:

Net Sales	$200,000	Operating Expenses	$40,000
Cost of Goods Sold	110,000	Other Income	25,000

Required

Calculate Erin’s gross profit percentage and return on sales ratio.
(Round answer to one decimal place.)

Gross profit percentage =	Answer
Return on sales ratio =	Answer

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