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profitability ratios

profitability ratios

FINANCIAL ACCOUNTING
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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Analyze and interpret the financial statement presented in terms of profitability ratios. A. Gross profit, operating and net income ratios See the second image as guide.
EWE Corporation issued the following income Sales revenue statement for the year 2020: (right column) PI,500,000 Cost of sales 500,000 Gross profit PI,000,000 PI,000,000 PI,500,000 Gross Profit ratio Operating Expenses 200,000 Operating Income P 800,000 Operating Profit ratio P800,000 PI,500,000 Interest Expense 300,000 Net income before tax P 500,000 Profit (net inc.) ratio = Income tax (20%). 100,000 P400,000 PI,500,000 Net income after tax P 400,000
Transcribed Image Text:EWE Corporation issued the following income Sales revenue statement for the year 2020: (right column) PI,500,000 Cost of sales 500,000 Gross profit PI,000,000 PI,000,000 PI,500,000 Gross Profit ratio Operating Expenses 200,000 Operating Income P 800,000 Operating Profit ratio P800,000 PI,500,000 Interest Expense 300,000 Net income before tax P 500,000 Profit (net inc.) ratio = Income tax (20%). 100,000 P400,000 PI,500,000 Net income after tax P 400,000
A. Gross profit, operating and net income ratios Example Corporation Income Statement Years ended December 31 (in thousands of dollars) 2020 2019 2018 $ 3,980 3,100 $ 3,750 2,950 $ 3,400 2,700 Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Interest expense 880 800 700 640 590 510 240 210 190 20 15 15 Loss on sale of equipment 4 Income before income taxes 215 195 171 Income tax expense 50 40 $ 155 36 $ 135 Net income $ 165
Transcribed Image Text:A. Gross profit, operating and net income ratios Example Corporation Income Statement Years ended December 31 (in thousands of dollars) 2020 2019 2018 $ 3,980 3,100 $ 3,750 2,950 $ 3,400 2,700 Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Interest expense 880 800 700 640 590 510 240 210 190 20 15 15 Loss on sale of equipment 4 Income before income taxes 215 195 171 Income tax expense 50 40 $ 155 36 $ 135 Net income $ 165
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